Correlation Between Microsoft and WELLS

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

Diversification Opportunities for Microsoft and WELLS

MicrosoftWELLSDiversified AwayMicrosoftWELLSDiversified Away100%
0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Microsoft and WELLS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and WELLS FARGO NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLS FARGO NEW 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 WELLS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELLS FARGO NEW has no effect on the direction of Microsoft i.e., Microsoft and WELLS go up and down completely randomly.

Pair Corralation between Microsoft and WELLS

If you would invest  0.00  in WELLS FARGO NEW on November 21, 2024 and sell it today you would earn a total of  0.00  from holding WELLS FARGO NEW or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy5.0%
ValuesDaily Returns

Microsoft  vs.  WELLS FARGO NEW

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -202468
JavaScript chart by amCharts 3.21.15MSFT 94974BGE4
       Timeline  
Microsoft 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb410420430440450
WELLS FARGO NEW 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days WELLS FARGO NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WELLS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Microsoft and WELLS Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.38-1.8-1.22-0.64-0.05940.491.071.652.232.81 0.050.100.15
JavaScript chart by amCharts 3.21.15MSFT 94974BGE4
       Returns  

Pair Trading with Microsoft and WELLS

The main advantage of trading using opposite Microsoft and WELLS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, WELLS 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 WELLS will offset losses from the drop in WELLS's long position.
The idea behind Microsoft and WELLS FARGO NEW 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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