Correlation Between Microsoft and New Opportunities

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

Diversification Opportunities for Microsoft and New Opportunities

0.0
  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between Microsoft and New Opportunities

If you would invest  37,535  in Microsoft on December 29, 2023 and sell it today you would earn a total of  4,537  from holding Microsoft or generate 12.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy1.61%
ValuesDaily Returns

Microsoft  vs.  NEW OPPORTUNITIES FUND

 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 uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.
New Opportunities Fund 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days New Opportunities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, New Opportunities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Microsoft and New Opportunities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and New Opportunities

The main advantage of trading using opposite Microsoft and New Opportunities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, New Opportunities 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 New Opportunities will offset losses from the drop in New Opportunities' long position.
The idea behind Microsoft and New Opportunities Fund 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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