Correlation Between Twitter and Microsoft Corp

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

Diversification Opportunities for Twitter and Microsoft Corp

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Twitter and Microsoft is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Twitter and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and Twitter 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 Twitter 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 Twitter i.e., Twitter and Microsoft Corp go up and down completely randomly.

Pair Corralation between Twitter and Microsoft Corp

Given the investment horizon of 90 days Twitter is expected to under-perform the Microsoft Corp. But the stock apears to be less risky and, when comparing its historical volatility, Twitter is 1.19 times less risky than Microsoft Corp. The stock trades about -0.11 of its potential returns per unit of risk. The Microsoft Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  27,002  in Microsoft Corp on April 4, 2022 and sell it today you would lose (1,044)  from holding Microsoft Corp or give up 3.87% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Twitter  vs.  Microsoft Corp

 Performance (%) 
      Timeline 
Twitter 
Twitter Performance
0 of 100
Over the last 90 days Twitter has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in August 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Twitter 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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in August 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-06-09
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

Twitter and Microsoft Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Twitter and Microsoft Corp

The main advantage of trading using opposite Twitter and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twitter 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.
The idea behind Twitter 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.
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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