Correlation Between Microsoft and Constellation Energy

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

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

Diversification Opportunities for Microsoft and Constellation Energy

0.0

Correlation Coefficient

Microsoft  Constellation Energy

Pay attention - limited upside

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

Pair Corralation between Microsoft and Constellation Energy

If you would invest  39,352  in Microsoft on October 9, 2024 and sell it today you would earn a total of  1,748  from holding Microsoft or generate 4.44% return on investment over 90 days.

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

Microsoft  vs.  Constellation Energy

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Constellation Energy

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Microsoft and Constellation Energy

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

The idea behind Microsoft and Constellation Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.