Correlation Between Microsoft and Touchstone Sands

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

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

Diversification Opportunities for Microsoft and Touchstone Sands

0.69

Correlation Coefficient

Microsoft  Touchstone Sands

Poor diversification

The 3 months correlation between Microsoft and Touchstone is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Touchstone Sands Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Sands Capital 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 Touchstone Sands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Sands Capital has no effect on the direction of Microsoft i.e., Microsoft and Touchstone Sands go up and down completely randomly.

Pair Corralation between Microsoft and Touchstone Sands

Given the investment horizon of 90 days Microsoft is expected to generate 13.18 times less return on investment than Touchstone Sands. In addition to that, Microsoft is 1.05 times more volatile than Touchstone Sands Capital. It trades about 0.01 of its total potential returns per unit of risk. Touchstone Sands Capital is currently generating about 0.13 per unit of volatility. If you would invest  1,454  in Touchstone Sands Capital on September 29, 2024 and sell it today you would earn a total of  160.00  from holding Touchstone Sands Capital or generate 11.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Touchstone Sands Capital

Microsoft

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Touchstone Sands Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Sands Capital are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Touchstone Sands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Touchstone Sands

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

The idea behind Microsoft and Touchstone Sands Capital 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.