Correlation Between Microsoft and 532457CG1

Can any of the company-specific risk be diversified away by investing in both Microsoft and 532457CG1 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 532457CG1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and LLY 4875 27 FEB 53, you can compare the effects of market volatilities on Microsoft and 532457CG1 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 532457CG1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and 532457CG1.

Diversification Opportunities for Microsoft and 532457CG1

-0.49

Correlation Coefficient

Microsoft  532457CG1

Very good diversification

The 3 months correlation between Microsoft and 532457CG1 is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and LLY 4875 27 FEB 53 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LLY 4875 27 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 532457CG1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LLY 4875 27 has no effect on the direction of Microsoft i.e., Microsoft and 532457CG1 go up and down completely randomly.

Pair Corralation between Microsoft and 532457CG1

Given the investment horizon of 90 days Microsoft is expected to under-perform the 532457CG1. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.12 times less risky than 532457CG1. The stock trades about -0.11 of its potential returns per unit of risk. The LLY 4875 27 FEB 53 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  9,076  in LLY 4875 27 FEB 53 on December 30, 2024 and sell it today you would earn a total of  1,245  from holding LLY 4875 27 FEB 53 or generate 13.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  LLY 4875 27 FEB 53

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

LLY 4875 27

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LLY 4875 27 FEB 53 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, 532457CG1 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and 532457CG1

The main advantage of trading using opposite Microsoft and 532457CG1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, 532457CG1 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 532457CG1 will offset losses from the drop in 532457CG1's long position.

The idea behind Microsoft and LLY 4875 27 FEB 53 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.