Correlation Between Microsoft and INGERSOLL

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

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

Diversification Opportunities for Microsoft and INGERSOLL

-0.37

Correlation Coefficient

Microsoft  INGERSOLL

Very good diversification

The 3 months correlation between Microsoft and INGERSOLL is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and INGERSOLL RAND LUXEMBOURG FINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGERSOLL RAND LUXEM 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 INGERSOLL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGERSOLL RAND LUXEM has no effect on the direction of Microsoft i.e., Microsoft and INGERSOLL go up and down completely randomly.

Pair Corralation between Microsoft and INGERSOLL

Given the investment horizon of 90 days Microsoft is expected to generate 1.74 times more return on investment than INGERSOLL. However, Microsoft is 1.74 times more volatile than INGERSOLL RAND LUXEMBOURG FINANCE. It trades about 0.51 of its potential returns per unit of risk. INGERSOLL RAND LUXEMBOURG FINANCE is currently generating about -0.15 per unit of risk. If you would invest  41,493  in Microsoft on September 19, 2024 and sell it today you would earn a total of  3,953  from holding Microsoft or generate 9.53% return on investment over 90 days.

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

Microsoft  vs.  INGERSOLL RAND LUXEMBOURG FINA

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

INGERSOLL RAND LUXEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND LUXEMBOURG FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INGERSOLL 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 INGERSOLL

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

The idea behind Microsoft and INGERSOLL RAND LUXEMBOURG FINANCE 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.