Correlation Between Microsoft and CM Hospitalar

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

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

Diversification Opportunities for Microsoft and CM Hospitalar

-0.09

Correlation Coefficient

Microsoft  CM Hospitalar

Good diversification

The 3 months correlation between Microsoft and VVEO3 is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CM Hospitalar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM Hospitalar SA 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 CM Hospitalar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM Hospitalar SA has no effect on the direction of Microsoft i.e., Microsoft and CM Hospitalar go up and down completely randomly.

Pair Corralation between Microsoft and CM Hospitalar

Assuming the 90 days trading horizon Microsoft is expected to under-perform the CM Hospitalar. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.36 times less risky than CM Hospitalar. The stock trades about -0.05 of its potential returns per unit of risk. The CM Hospitalar SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  194.00  in CM Hospitalar SA on October 6, 2024 and sell it today you would earn a total of  11.00  from holding CM Hospitalar SA or generate 5.67% return on investment over 90 days.

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

Microsoft  vs.  CM Hospitalar SA

Microsoft

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

CM Hospitalar SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CM Hospitalar SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CM Hospitalar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and CM Hospitalar

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

The idea behind Microsoft and CM Hospitalar SA 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 Transaction History module to view history of all your transactions and understand their impact on performance.