Correlation Between Microsoft and Ecofin Global

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

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

Diversification Opportunities for Microsoft and Ecofin Global

0.75

Correlation Coefficient

Microsoft  Ecofin Global

Poor diversification

The 3 months correlation between Microsoft and Ecofin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ecofin Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofin Global Water 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 Ecofin Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofin Global Water has no effect on the direction of Microsoft i.e., Microsoft and Ecofin Global go up and down completely randomly.

Pair Corralation between Microsoft and Ecofin Global

Given the investment horizon of 90 days Microsoft is expected to under-perform the Ecofin Global. In addition to that, Microsoft is 1.43 times more volatile than Ecofin Global Water. It trades about -0.17 of its total potential returns per unit of risk. Ecofin Global Water is currently generating about -0.11 per unit of volatility. If you would invest  4,639  in Ecofin Global Water on January 25, 2024 and sell it today you would lose (77.00) from holding Ecofin Global Water or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Ecofin Global Water

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Ecofin Global Water

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofin Global Water are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Ecofin Global may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Microsoft and Ecofin Global

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

The idea behind Microsoft and Ecofin Global Water 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.