Correlation Between Microsoft Corp and Postal Svgs

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

Diversification Opportunities for Microsoft Corp and Postal Svgs

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Microsoft and Postal is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Postal Svgs Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Svgs Bk 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 Postal Svgs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Svgs Bk has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Postal Svgs go up and down completely randomly.

Pair Corralation between Microsoft Corp and Postal Svgs

Given the investment horizon of 90 days Microsoft Corp is expected to generate 0.77 times more return on investment than Postal Svgs. However, Microsoft Corp is 1.3 times less risky than Postal Svgs. It trades about 0.0 of its potential returns per unit of risk. Postal Svgs Bk is currently generating about -0.01 per unit of risk. If you would invest  25,626  in Microsoft Corp on July 9, 2022 and sell it today you would lose (2,202)  from holding Microsoft Corp or give up 8.59% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Postal Svgs Bk

 Performance (%) 
       Timeline  
Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Postal Svgs Bk 
Postal Performance
0 of 100
Over the last 90 days Postal Svgs Bk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Postal Price Channel

Microsoft Corp and Postal Svgs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and Postal Svgs

The main advantage of trading using opposite Microsoft Corp and Postal Svgs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Postal Svgs 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 Postal Svgs will offset losses from the drop in Postal Svgs' long position.
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The idea behind Microsoft Corp and Postal Svgs Bk 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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