Correlation Between Microsoft and TRAVELERS

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

By analyzing existing cross correlation between Microsoft and TRAVELERS INC 4, you can compare the effects of market volatilities on Microsoft and TRAVELERS 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 TRAVELERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and TRAVELERS.

Diversification Opportunities for Microsoft and TRAVELERS

0.13

Correlation Coefficient

Microsoft  TRAVELERS

Average diversification

The 3 months correlation between Microsoft and TRAVELERS is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TRAVELERS INC 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVELERS INC 4 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 TRAVELERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVELERS INC 4 has no effect on the direction of Microsoft i.e., Microsoft and TRAVELERS go up and down completely randomly.

Pair Corralation between Microsoft and TRAVELERS

Given the investment horizon of 90 days Microsoft is expected to under-perform the TRAVELERS. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.61 times less risky than TRAVELERS. The stock trades about -0.25 of its potential returns per unit of risk. The TRAVELERS INC 4 is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,947  in TRAVELERS INC 4 on December 5, 2024 and sell it today you would lose (25.00) from holding TRAVELERS INC 4 or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Microsoft  vs.  TRAVELERS INC 4

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.

TRAVELERS INC 4

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRAVELERS INC 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for TRAVELERS INC 4 investors.

Pair Trading with Microsoft and TRAVELERS

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

The idea behind Microsoft and TRAVELERS INC 4 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.