Correlation Between Microsoft and CRYOLIFE

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Can any of the company-specific risk be diversified away by investing in both Microsoft and CRYOLIFE 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 CRYOLIFE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CRYOLIFE, you can compare the effects of market volatilities on Microsoft and CRYOLIFE 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 CRYOLIFE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CRYOLIFE.

Diversification Opportunities for Microsoft and CRYOLIFE

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Microsoft and CRYOLIFE is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CRYOLIFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRYOLIFE 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 CRYOLIFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRYOLIFE has no effect on the direction of Microsoft i.e., Microsoft and CRYOLIFE go up and down completely randomly.

Pair Corralation between Microsoft and CRYOLIFE

Assuming the 90 days trading horizon Microsoft is expected to generate 0.97 times more return on investment than CRYOLIFE. However, Microsoft is 1.03 times less risky than CRYOLIFE. It trades about 0.18 of its potential returns per unit of risk. CRYOLIFE is currently generating about 0.04 per unit of risk. If you would invest  39,845  in Microsoft on September 26, 2024 and sell it today you would earn a total of  2,120  from holding Microsoft or generate 5.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  CRYOLIFE

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.
CRYOLIFE 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CRYOLIFE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, CRYOLIFE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Microsoft and CRYOLIFE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and CRYOLIFE

The main advantage of trading using opposite Microsoft and CRYOLIFE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CRYOLIFE 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 CRYOLIFE will offset losses from the drop in CRYOLIFE's long position.
The idea behind Microsoft and CRYOLIFE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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