Correlation Between Microsoft and Virtus Tax

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

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

Diversification Opportunities for Microsoft and Virtus Tax

0.14

Correlation Coefficient

Microsoft  Virtus Tax

Average diversification

The 3 months correlation between Microsoft and Virtus is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Virtus Tax Exempt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Tax Exempt 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 Virtus Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Tax Exempt has no effect on the direction of Microsoft i.e., Microsoft and Virtus Tax go up and down completely randomly.

Pair Corralation between Microsoft and Virtus Tax

Given the investment horizon of 90 days Microsoft is expected to under-perform the Virtus Tax. In addition to that, Microsoft is 6.89 times more volatile than Virtus Tax Exempt Bond. It trades about -0.24 of its total potential returns per unit of risk. Virtus Tax Exempt Bond is currently generating about -0.33 per unit of volatility. If you would invest  1,031  in Virtus Tax Exempt Bond on January 20, 2024 and sell it today you would lose (10.00) from holding Virtus Tax Exempt Bond or give up 0.97% of portfolio value over 90 days.

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

Microsoft  vs.  Virtus Tax Exempt Bond

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Virtus Tax Exempt

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Microsoft and Virtus Tax

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

The idea behind Microsoft and Virtus Tax Exempt Bond 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.