Correlation Between Invesco Peak and Microsoft Corp

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

Diversification Opportunities for Invesco Peak and Microsoft Corp

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Invesco and Microsoft is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Peak Retirement and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and Invesco Peak 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 Invesco Peak Retirement are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of Invesco Peak i.e., Invesco Peak and Microsoft Corp go up and down completely randomly.

Pair Corralation between Invesco Peak and Microsoft Corp

Assuming the 90 days horizon Invesco Peak is expected to generate 3.05 times less return on investment than Microsoft Corp. But when comparing it to its historical volatility, Invesco Peak Retirement is 1.65 times less risky than Microsoft Corp. It trades about 0.01 of its potential returns per unit of risk. Microsoft Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  21,051  in Microsoft Corp on July 9, 2022 and sell it today you would earn a total of  3,628  from holding Microsoft Corp or generate 17.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.8%
ValuesDaily Returns

Invesco Peak Retirement  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
Invesco Peak Retirement 
Invesco Performance
0 of 100
Over the last 90 days Invesco Peak Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Peak is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Invesco Price Channel

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

Invesco Peak and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Invesco Peak and Microsoft Corp

The main advantage of trading using opposite Invesco Peak and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Peak position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
Invesco Peak vs. Microsoft Corp
The idea behind Invesco Peak Retirement and Microsoft Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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