Correlation Between MTY Food and Microsoft

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

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

Diversification Opportunities for MTY Food and Microsoft

0.71

Correlation Coefficient

MTY Food  Microsoft

Poor diversification

The 3 months correlation between MTY and Microsoft is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and MTY Food 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 MTY Food Group 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 MTY Food i.e., MTY Food and Microsoft go up and down completely randomly.

Pair Corralation between MTY Food and Microsoft

Assuming the 90 days horizon MTY Food Group is expected to under-perform the Microsoft. In addition to that, MTY Food is 1.44 times more volatile than Microsoft. It trades about -0.02 of its total potential returns per unit of risk. Microsoft is currently generating about 0.05 per unit of volatility. If you would invest  35,355  in Microsoft on October 9, 2024 and sell it today you would earn a total of  5,565  from holding Microsoft or generate 15.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

MTY Food Group  vs.  Microsoft

MTY Food Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MTY Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Microsoft

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MTY Food and Microsoft

The main advantage of trading using opposite MTY Food and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTY Food 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 MTY Food Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.