Correlation Between Microsoft Corp and Bar Harbor

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

Diversification Opportunities for Microsoft Corp and Bar Harbor

0.75
  Correlation Coefficient

Poor diversification

The 1 month correlation between Microsoft and Bar Harbor is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Bar Harbor Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bar Harbor Bankshares and Microsoft Corp 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 Corp are associated (or correlated) with Bar Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bar Harbor Bankshares has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Bar Harbor go up and down completely randomly.

Pair Corralation between Microsoft Corp and Bar Harbor

Given the investment horizon of 90 days Microsoft Corp is expected to generate 1.43 times more return on investment than Bar Harbor. However, Microsoft Corp is 1.43 times more volatile than Bar Harbor Bankshares. It trades about 0.25 of its potential returns per unit of risk. Bar Harbor Bankshares is currently generating about 0.27 per unit of risk. If you would invest  26,171  in Microsoft Corp on May 21, 2022 and sell it today you would earn a total of  2,846  from holding Microsoft Corp or generate 10.87% return on investment over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Bar Harbor Bankshares

 Performance (%) 
       Timeline  
Microsoft Corp 
Microsoft Performance
18 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Microsoft Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft Price Channel

Bar Harbor Bankshares 
Bar Harbor Performance
20 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bar Harbor Bankshares are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical indicators, Bar Harbor sustained solid returns over the last few months and may actually be approaching a breakup point.

Bar Harbor Price Channel

Microsoft Corp and Bar Harbor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and Bar Harbor

The main advantage of trading using opposite Microsoft Corp and Bar Harbor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Bar Harbor 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 Bar Harbor will offset losses from the drop in Bar Harbor's long position.
The idea behind Microsoft Corp and Bar Harbor Bankshares 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.

Bar Harbor Bankshares

Pair trading matchups for Bar Harbor

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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