Correlation Between EverCommerce and Microsoft

Can any of the company-specific risk be diversified away by investing in both EverCommerce and Microsoft 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 EverCommerce and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EverCommerce and Microsoft, you can compare the effects of market volatilities on EverCommerce and Microsoft 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 EverCommerce with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of EverCommerce and Microsoft.

Diversification Opportunities for EverCommerce and Microsoft

-0.22

Correlation Coefficient

EverCommerce  Microsoft

Very good diversification

The 3 months correlation between EverCommerce and Microsoft is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding EverCommerce and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and EverCommerce 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 EverCommerce are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of EverCommerce i.e., EverCommerce and Microsoft go up and down completely randomly.

Pair Corralation between EverCommerce and Microsoft

Given the investment horizon of 90 days EverCommerce is expected to generate 1.2 times more return on investment than Microsoft. However, EverCommerce is 1.2 times more volatile than Microsoft. It trades about 0.07 of its potential returns per unit of risk. Microsoft is currently generating about -0.07 per unit of risk. If you would invest  928.00  in EverCommerce on February 7, 2024 and sell it today you would earn a total of  22.00  from holding EverCommerce or generate 2.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EverCommerce  vs.  Microsoft

EverCommerce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EverCommerce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, EverCommerce is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

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.

Pair Trading with EverCommerce and Microsoft

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

The idea behind EverCommerce and Microsoft 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.