Correlation Between Raytheon Technologies and Microsoft

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

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

Diversification Opportunities for Raytheon Technologies and Microsoft

0.0

Correlation Coefficient

Raytheon Technologies  Microsoft

Pay attention - limited upside

The 3 months correlation between Raytheon and Microsoft is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies i.e., Raytheon Technologies and Microsoft go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Microsoft

If you would invest  30,450  in Microsoft on February 3, 2024 and sell it today you would earn a total of  10,216  from holding Microsoft or generate 33.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Raytheon Technologies  vs.  Microsoft

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytheon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The current stock price disturbance, 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 Raytheon Technologies and Microsoft

The main advantage of trading using opposite Raytheon Technologies and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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 Raytheon Technologies 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..