Correlation Between Microsoft and Migdal Mutual

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Migdal Mutual 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 Migdal Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Migdal Mutual Funds, you can compare the effects of market volatilities on Microsoft and Migdal Mutual 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 Migdal Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Migdal Mutual.

Diversification Opportunities for Microsoft and Migdal Mutual

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Microsoft and Migdal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Migdal Mutual Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Migdal Mutual Funds 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 Migdal Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Migdal Mutual Funds has no effect on the direction of Microsoft i.e., Microsoft and Migdal Mutual go up and down completely randomly.

Pair Corralation between Microsoft and Migdal Mutual

Given the investment horizon of 90 days Microsoft is expected to generate 1.2 times more return on investment than Migdal Mutual. However, Microsoft is 1.2 times more volatile than Migdal Mutual Funds. It trades about 0.12 of its potential returns per unit of risk. Migdal Mutual Funds is currently generating about 0.08 per unit of risk. If you would invest  40,748  in Microsoft on December 29, 2023 and sell it today you would earn a total of  1,395  from holding Microsoft or generate 3.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy81.82%
ValuesDaily Returns

Microsoft  vs.  Migdal Mutual Funds

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Migdal Mutual Funds 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Migdal Mutual Funds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Migdal Mutual may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Microsoft and Migdal Mutual Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Migdal Mutual

The main advantage of trading using opposite Microsoft and Migdal Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Migdal Mutual 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 Migdal Mutual will offset losses from the drop in Migdal Mutual's long position.
The idea behind Microsoft and Migdal Mutual Funds 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.
Check out your portfolio center.
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.

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