Correlation Between Microsoft and 124857AN3

Can any of the company-specific risk be diversified away by investing in both Microsoft and 124857AN3 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 124857AN3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and CBS P NEW, you can compare the effects of market volatilities on Microsoft and 124857AN3 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 124857AN3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and 124857AN3.

Diversification Opportunities for Microsoft and 124857AN3

0.0

Correlation Coefficient

Microsoft  124857AN3

Pay attention - limited upside

The 3 months correlation between Microsoft and 124857AN3 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CBS P NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBS P NEW 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 124857AN3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBS P NEW has no effect on the direction of Microsoft i.e., Microsoft and 124857AN3 go up and down completely randomly.

Pair Corralation between Microsoft and 124857AN3

Given the investment horizon of 90 days Microsoft is expected to generate 1.7 times less return on investment than 124857AN3. In addition to that, Microsoft is 1.03 times more volatile than CBS P NEW. It trades about 0.05 of its total potential returns per unit of risk. CBS P NEW is currently generating about 0.09 per unit of volatility. If you would invest  7,208  in CBS P NEW on September 2, 2024 and sell it today you would earn a total of  396.00  from holding CBS P NEW or generate 5.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	82.81%
Values	Daily Returns

Microsoft  vs.  CBS P NEW

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.

CBS P NEW

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CBS P NEW are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, 124857AN3 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and 124857AN3

The main advantage of trading using opposite Microsoft and 124857AN3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, 124857AN3 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 124857AN3 will offset losses from the drop in 124857AN3's long position.

The idea behind Microsoft and CBS P NEW 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.