Correlation Between Microsoft and RADIATE

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

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

Diversification Opportunities for Microsoft and RADIATE

-0.13

Correlation Coefficient

Microsoft  RADIATE

Good diversification

The 3 months correlation between Microsoft and RADIATE is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and RADIATE HOLDCO LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RADIATE HOLDCO LLC 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 RADIATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RADIATE HOLDCO LLC has no effect on the direction of Microsoft i.e., Microsoft and RADIATE go up and down completely randomly.

Pair Corralation between Microsoft and RADIATE

Given the investment horizon of 90 days Microsoft is expected to generate 0.2 times more return on investment than RADIATE. However, Microsoft is 4.92 times less risky than RADIATE. It trades about -0.14 of its potential returns per unit of risk. RADIATE HOLDCO LLC is currently generating about -0.18 per unit of risk. If you would invest  44,173  in Microsoft on December 5, 2024 and sell it today you would lose (5,312) from holding Microsoft or give up 12.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.81%
Values	Daily Returns

Microsoft  vs.  RADIATE HOLDCO LLC

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

RADIATE HOLDCO LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days RADIATE HOLDCO LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for RADIATE HOLDCO LLC investors.

Pair Trading with Microsoft and RADIATE

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

The idea behind Microsoft and RADIATE HOLDCO LLC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.