Correlation Between Microsoft and Strategic Allocation

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

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

Diversification Opportunities for Microsoft and Strategic Allocation

0.45

Correlation Coefficient

Microsoft  Strategic Allocation

Very weak diversification

The 3 months correlation between Microsoft and Strategic is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Strategic Allocation Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Microsoft i.e., Microsoft and Strategic Allocation go up and down completely randomly.

Pair Corralation between Microsoft and Strategic Allocation

Given the investment horizon of 90 days Microsoft is expected to generate 4.11 times more return on investment than Strategic Allocation. However, Microsoft is 4.11 times more volatile than Strategic Allocation Servative. It trades about 0.05 of its potential returns per unit of risk. Strategic Allocation Servative is currently generating about 0.18 per unit of risk. If you would invest  40,862  in Microsoft on September 2, 2024 and sell it today you would earn a total of  1,484  from holding Microsoft or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Strategic Allocation Servative

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Strategic Allocation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Allocation Servative are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Strategic Allocation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Strategic Allocation

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

The idea behind Microsoft and Strategic Allocation Servative 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.