Correlation Between Microsoft and Tecogen

Can any of the company-specific risk be diversified away by investing in both Microsoft and Tecogen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Tecogen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Tecogen, you can compare the effects of market volatilities on Microsoft and Tecogen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Tecogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Tecogen.

Diversification Opportunities for Microsoft and Tecogen

0.0

Correlation Coefficient

Microsoft  Tecogen

Pay attention - limited upside

The 3 months correlation between Microsoft and Tecogen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Tecogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecogen and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Tecogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecogen has no effect on the direction of Microsoft i.e., Microsoft and Tecogen go up and down completely randomly.

Pair Corralation between Microsoft and Tecogen

If you would invest (100.00) in Tecogen on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Tecogen or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Tecogen

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Tecogen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tecogen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tecogen is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Tecogen

The main advantage of trading using opposite Microsoft and Tecogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Tecogen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tecogen will offset losses from the drop in Tecogen's long position.

The idea behind Microsoft and Tecogen pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.