Correlation Between Microsoft and TTM Technologies

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

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

Diversification Opportunities for Microsoft and TTM Technologies

0.41

Correlation Coefficient

Microsoft  TTM Technologies

Very weak diversification

The 3 months correlation between Microsoft and TTM is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TTM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTM Technologies 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 TTM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTM Technologies has no effect on the direction of Microsoft i.e., Microsoft and TTM Technologies go up and down completely randomly.

Pair Corralation between Microsoft and TTM Technologies

Given the investment horizon of 90 days Microsoft is expected to generate 1.29 times less return on investment than TTM Technologies. But when comparing it to its historical volatility, Microsoft is 1.36 times less risky than TTM Technologies. It trades about 0.18 of its potential returns per unit of risk. TTM Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,220  in TTM Technologies on September 23, 2024 and sell it today you would earn a total of  140.00  from holding TTM Technologies or generate 6.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  TTM Technologies

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

TTM Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TTM Technologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TTM Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and TTM Technologies

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

The idea behind Microsoft and TTM Technologies 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.