Correlation Between Microsoft and Trellidor Holdings

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

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

Diversification Opportunities for Microsoft and Trellidor Holdings

-0.56

Correlation Coefficient

Microsoft  Trellidor Holdings

Excellent diversification

The 3 months correlation between Microsoft and Trellidor is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Trellidor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trellidor Holdings 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 Trellidor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trellidor Holdings has no effect on the direction of Microsoft i.e., Microsoft and Trellidor Holdings go up and down completely randomly.

Pair Corralation between Microsoft and Trellidor Holdings

Given the investment horizon of 90 days Microsoft is expected to under-perform the Trellidor Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.28 times less risky than Trellidor Holdings. The stock trades about -0.11 of its potential returns per unit of risk. The Trellidor Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  17,400  in Trellidor Holdings on December 25, 2024 and sell it today you would earn a total of  3,600  from holding Trellidor Holdings or generate 20.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Microsoft  vs.  Trellidor Holdings

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.

Trellidor Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trellidor Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Trellidor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Trellidor Holdings

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

The idea behind Microsoft and Trellidor Holdings 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.