diversifiable risk of combining Twitter and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Twitter and Microsoft, you can compare the effects of market volatilities on Twitter and Microsoft 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 Twitter with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Twitter and Microsoft.
Diversification Opportunities for Twitter and Microsoft
Pair Corralation between Twitter and Microsoft
If you would invest 40,182 in Microsoft on November 25, 2023 and sell it today you would earn a total of 983.00 from holding Microsoft or generate 2.45% return on investment over 90 days.
Twitter vs. Microsoft
Pair Trading with Twitter and MicrosoftThe main advantage of trading using opposite Twitter and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twitter position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position. The idea behind Twitter and Microsoft 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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