Correlation Between Microsoft and Westcore Municipal

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

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

Diversification Opportunities for Microsoft and Westcore Municipal

-0.72

Correlation Coefficient

Microsoft  Westcore Municipal

Pay attention - limited upside

The 3 months correlation between Microsoft and Westcore is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Westcore Municipal Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westcore Municipal 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 Westcore Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westcore Municipal has no effect on the direction of Microsoft i.e., Microsoft and Westcore Municipal go up and down completely randomly.

Pair Corralation between Microsoft and Westcore Municipal

Given the investment horizon of 90 days Microsoft is expected to under-perform the Westcore Municipal. In addition to that, Microsoft is 8.94 times more volatile than Westcore Municipal Opportunities. It trades about -0.11 of its total potential returns per unit of risk. Westcore Municipal Opportunities is currently generating about 0.04 per unit of volatility. If you would invest  955.00  in Westcore Municipal Opportunities on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Westcore Municipal Opportunities or generate 0.42% return on investment over 90 days.

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

Microsoft  vs.  Westcore Municipal Opportuniti

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.

Westcore Municipal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westcore Municipal Opportunities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Westcore Municipal 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 Westcore Municipal

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

The idea behind Microsoft and Westcore Municipal Opportunities 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.