Correlation Between Microsoft and TRB

Can any of the company-specific risk be diversified away by investing in both Microsoft and TRB 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 TRB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and TRB, you can compare the effects of market volatilities on Microsoft and TRB 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 TRB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and TRB.

Diversification Opportunities for Microsoft and TRB

0.79

Correlation Coefficient

Microsoft  TRB

Poor diversification

The 3 months correlation between Microsoft and TRB is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TRB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRB 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 TRB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRB has no effect on the direction of Microsoft i.e., Microsoft and TRB go up and down completely randomly.

Pair Corralation between Microsoft and TRB

Given the investment horizon of 90 days Microsoft is expected to generate 0.28 times more return on investment than TRB. However, Microsoft is 3.61 times less risky than TRB. It trades about -0.11 of its potential returns per unit of risk. TRB is currently generating about -0.2 per unit of risk. If you would invest  42,398  in Microsoft on December 30, 2024 and sell it today you would lose (4,518) from holding Microsoft or give up 10.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Microsoft  vs.  TRB

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.

TRB

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for TRB shareholders.

Pair Trading with Microsoft and TRB

The main advantage of trading using opposite Microsoft and TRB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, TRB 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 TRB will offset losses from the drop in TRB's long position.

The idea behind Microsoft and TRB 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.