Correlation Between Microsoft and Value Fund

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

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

Diversification Opportunities for Microsoft and Value Fund

0.06

Correlation Coefficient

Microsoft  Value Fund

Significant diversification

The 3 months correlation between Microsoft and Value is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Value Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Investor 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Investor has no effect on the direction of Microsoft i.e., Microsoft and Value Fund go up and down completely randomly.

Pair Corralation between Microsoft and Value Fund

Given the investment horizon of 90 days Microsoft is expected to generate 1.16 times more return on investment than Value Fund. However, Microsoft is 1.16 times more volatile than Value Fund Investor. It trades about -0.01 of its potential returns per unit of risk. Value Fund Investor is currently generating about -0.1 per unit of risk. If you would invest  41,466  in Microsoft on November 20, 2024 and sell it today you would lose (623.00) from holding Microsoft or give up 1.5% of portfolio value over 90 days.

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

Microsoft  vs.  Value Fund Investor

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 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.

Value Fund Investor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Value Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Microsoft and Value Fund

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

The idea behind Microsoft and Value Fund Investor 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.