diversifiable risk of combining Microsoft and Advantis Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Advantis Corp, you can compare the effects of market volatilities on Microsoft and Advantis Corp 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 Advantis Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Advantis Corp.
Diversification Opportunities for Microsoft and Advantis Corp
Pair Corralation between Microsoft and Advantis Corp
Microsoft vs. Advantis Corp
Microsoft and Advantis Corp Volatility Contrast
Pair Trading with Microsoft and Advantis CorpThe main advantage of trading using opposite Microsoft and Advantis Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Advantis Corp 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 Advantis Corp will offset losses from the drop in Advantis Corp's long position. The idea behind Microsoft and Advantis Corp 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.