Correlation Between Microsoft and COL Financial

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

Diversification Opportunities for Microsoft and COL Financial

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Microsoft and COL is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and COL Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COL Financial Group 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 COL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COL Financial Group has no effect on the direction of Microsoft i.e., Microsoft and COL Financial go up and down completely randomly.

Pair Corralation between Microsoft and COL Financial

Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than COL Financial. However, Microsoft is 1.36 times less risky than COL Financial. It trades about 0.08 of its potential returns per unit of risk. COL Financial Group is currently generating about -0.04 per unit of risk. If you would invest  24,341  in Microsoft on August 29, 2024 and sell it today you would earn a total of  17,958  from holding Microsoft or generate 73.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy88.51%
ValuesDaily Returns

Microsoft  vs.  COL Financial Group

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
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.
COL Financial Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COL Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, COL Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Microsoft and COL Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and COL Financial

The main advantage of trading using opposite Microsoft and COL Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, COL Financial 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 COL Financial will offset losses from the drop in COL Financial's long position.
The idea behind Microsoft and COL Financial Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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