Correlation Between Microsoft and Harbor Emerging

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

By analyzing existing cross correlation between Microsoft and Harbor Emerging Markets, you can compare the effects of market volatilities on Microsoft and Harbor Emerging 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 Harbor Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Harbor Emerging.

Diversification Opportunities for Microsoft and Harbor Emerging

-0.24

Correlation Coefficient

Microsoft  Harbor Emerging

Very good diversification

The 3 months correlation between Microsoft and Harbor is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Harbor Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Emerging Markets 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 Harbor Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Emerging Markets has no effect on the direction of Microsoft i.e., Microsoft and Harbor Emerging go up and down completely randomly.

Pair Corralation between Microsoft and Harbor Emerging

If you would invest  41,312  in Microsoft on June 30, 2024 and sell it today you would earn a total of  1,490  from holding Microsoft or generate 3.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Microsoft  vs.  Harbor Emerging Markets

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Harbor Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Harbor Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Harbor Emerging

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

The idea behind Microsoft and Harbor Emerging Markets 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.