Correlation Between Microsoft and DTN

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

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

Diversification Opportunities for Microsoft and DTN

-0.55

Correlation Coefficient

Microsoft  DTN

Excellent diversification

The 3 months correlation between Microsoft and DTN is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and DTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTN 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 DTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTN has no effect on the direction of Microsoft i.e., Microsoft and DTN go up and down completely randomly.

Pair Corralation between Microsoft and DTN

If you would invest  9,295  in DTN on February 2, 2024 and sell it today you would earn a total of  0.00  from holding DTN or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Microsoft  vs.  DTN

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

DTN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, DTN is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and DTN

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

The idea behind Microsoft and DTN 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.