Correlation Between Microsoft and ROSENBAUER INTERNAT

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

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

Diversification Opportunities for Microsoft and ROSENBAUER INTERNAT

-0.44

Correlation Coefficient

Microsoft  ROSENBAUER INTERNAT

Very good diversification

The 3 months correlation between Microsoft and ROSENBAUER is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ROSENBAUER INTERNAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROSENBAUER INTERNAT 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 ROSENBAUER INTERNAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROSENBAUER INTERNAT has no effect on the direction of Microsoft i.e., Microsoft and ROSENBAUER INTERNAT go up and down completely randomly.

Pair Corralation between Microsoft and ROSENBAUER INTERNAT

Assuming the 90 days trading horizon Microsoft is expected to under-perform the ROSENBAUER INTERNAT. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.4 times less risky than ROSENBAUER INTERNAT. The stock trades about -0.16 of its potential returns per unit of risk. The ROSENBAUER INTERNAT is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,780  in ROSENBAUER INTERNAT on February 3, 2024 and sell it today you would earn a total of  170.00  from holding ROSENBAUER INTERNAT or generate 6.12% return on investment over 90 days.

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

Microsoft  vs.  ROSENBAUER INTERNAT

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

ROSENBAUER INTERNAT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ROSENBAUER INTERNAT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, ROSENBAUER INTERNAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and ROSENBAUER INTERNAT

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

The idea behind Microsoft and ROSENBAUER INTERNAT 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.