Correlation Between Microsoft and Cervus Equipment

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

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

Diversification Opportunities for Microsoft and Cervus Equipment

0.0

Correlation Coefficient

Microsoft  Cervus Equipment

Pay attention - limited upside

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

Pair Corralation between Microsoft and Cervus Equipment

If you would invest (100.00) in Cervus Equipment on October 12, 2024 and sell it today you would earn a total of  100.00  from holding Cervus Equipment or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Cervus Equipment

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Cervus Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cervus Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Cervus Equipment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and Cervus Equipment

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

The idea behind Microsoft and Cervus Equipment 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.