Correlation Between Microsoft and Cvent Holding

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

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

Diversification Opportunities for Microsoft and Cvent Holding

0.21

Correlation Coefficient

Microsoft  Cvent Holding

Modest diversification

The 3 months correlation between Microsoft and Cvent is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cvent Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cvent Holding Corp and Microsoft 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 are associated (or correlated) with Cvent Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cvent Holding Corp has no effect on the direction of Microsoft i.e., Microsoft and Cvent Holding go up and down completely randomly.

Pair Corralation between Microsoft and Cvent Holding

Given the investment horizon of 90 days Microsoft is expected to generate 3.23 times less return on investment than Cvent Holding. But when comparing it to its historical volatility, Microsoft is 2.09 times less risky than Cvent Holding. It trades about 0.08 of its potential returns per unit of risk. Cvent Holding Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  542.00  in Cvent Holding Corp on August 24, 2024 and sell it today you would earn a total of  310.00  from holding Cvent Holding Corp or generate 57.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	27.22%
Values	Daily Returns

Microsoft  vs.  Cvent Holding Corp

Microsoft

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Cvent Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cvent Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cvent Holding 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 Microsoft and Cvent Holding

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

The idea behind Microsoft and Cvent Holding 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 the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.