Correlation Between Microsoft and Computer Task

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

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

Diversification Opportunities for Microsoft and Computer Task

0.0

Correlation Coefficient

Microsoft  Computer Task

Pay attention - limited upside

The 3 months correlation between Microsoft and Computer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Computer Task Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Task Group 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 Computer Task. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Task Group has no effect on the direction of Microsoft i.e., Microsoft and Computer Task go up and down completely randomly.

Pair Corralation between Microsoft and Computer Task

Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than Computer Task. However, Microsoft is 1.36 times less risky than Computer Task. It trades about 0.06 of its potential returns per unit of risk. Computer Task Group is currently generating about 0.03 per unit of risk. If you would invest  25,592  in Microsoft on January 31, 2024 and sell it today you would earn a total of  14,633  from holding Microsoft or generate 57.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	81.38%
Values	Daily Returns

Microsoft  vs.  Computer Task Group

Microsoft

Risk-Adjusted Performance

1 of 100

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.

Computer Task Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Task Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Computer Task is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Computer Task

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

The idea behind Microsoft and Computer Task Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.