Correlation Between CrowdStrike Holdings and Microsoft

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

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

Diversification Opportunities for CrowdStrike Holdings and Microsoft

-0.49

Correlation Coefficient

CrowdStrike Holdings  Microsoft

Very good diversification

The 3 months correlation between CrowdStrike and Microsoft is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CrowdStrike Holdings and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and CrowdStrike Holdings 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 CrowdStrike Holdings 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 CrowdStrike Holdings i.e., CrowdStrike Holdings and Microsoft go up and down completely randomly.

Pair Corralation between CrowdStrike Holdings and Microsoft

Assuming the 90 days horizon CrowdStrike Holdings is expected to generate 1.88 times more return on investment than Microsoft. However, CrowdStrike Holdings is 1.88 times more volatile than Microsoft. It trades about 0.18 of its potential returns per unit of risk. Microsoft is currently generating about 0.0 per unit of risk. If you would invest  32,845  in CrowdStrike Holdings on November 20, 2024 and sell it today you would earn a total of  10,395  from holding CrowdStrike Holdings or generate 31.65% return on investment over 90 days.

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

CrowdStrike Holdings  vs.  Microsoft

CrowdStrike Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CrowdStrike Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CrowdStrike Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CrowdStrike Holdings and Microsoft

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

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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 CEOs Directory module to screen CEOs from public companies around the world.