Correlation Between Microsoft and Performance Trust
Can any of the company-specific risk be diversified away by investing in both Microsoft and Performance Trust 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 Performance Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Performance Trust Municipal, you can compare the effects of market volatilities on Microsoft and Performance Trust 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 Performance Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Performance Trust.
Diversification Opportunities for Microsoft and Performance Trust
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Performance is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Performance Trust Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Trust 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 Performance Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Trust has no effect on the direction of Microsoft i.e., Microsoft and Performance Trust go up and down completely randomly.
Pair Corralation between Microsoft and Performance Trust
Given the investment horizon of 90 days Microsoft is expected to under-perform the Performance Trust. In addition to that, Microsoft is 4.43 times more volatile than Performance Trust Municipal. It trades about -0.01 of its total potential returns per unit of risk. Performance Trust Municipal is currently generating about 0.12 per unit of volatility. If you would invest 2,289 in Performance Trust Municipal on August 29, 2024 and sell it today you would earn a total of 25.00 from holding Performance Trust Municipal or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Performance Trust Municipal
Performance |
| Timeline |
| Microsoft |
| Performance Trust |
Microsoft and Performance Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Performance Trust
The main advantage of trading using opposite Microsoft and Performance Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Performance Trust 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 Performance Trust will offset losses from the drop in Performance Trust's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Performance Trust vs. Vanguard Intermediate Term Tax Exempt | Performance Trust vs. Vanguard Intermediate Term Tax Exempt | Performance Trust vs. Tax Exempt Bond | Performance Trust vs. Tax Exempt Bond |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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