Correlation Between Microsoft and Uniper SE

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

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

Diversification Opportunities for Microsoft and Uniper SE

-0.45

Correlation Coefficient

Microsoft  Uniper SE

Very good diversification

The 3 months correlation between Microsoft and Uniper is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Uniper SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniper SE 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 Uniper SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniper SE has no effect on the direction of Microsoft i.e., Microsoft and Uniper SE go up and down completely randomly.

Pair Corralation between Microsoft and Uniper SE

Assuming the 90 days trading horizon Microsoft is expected to generate 0.53 times more return on investment than Uniper SE. However, Microsoft is 1.87 times less risky than Uniper SE. It trades about -0.03 of its potential returns per unit of risk. Uniper SE is currently generating about -0.04 per unit of risk. If you would invest  45,676  in Microsoft on September 29, 2024 and sell it today you would lose (2,726) from holding Microsoft or give up 5.97% of portfolio value over 90 days.

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

Microsoft  vs.  Uniper SE

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 basic indicators, Microsoft is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Uniper SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uniper SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Uniper SE

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

The idea behind Microsoft and Uniper SE 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.