Correlation Between Microsoft and Adyen NV

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

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

Diversification Opportunities for Microsoft and Adyen NV

-0.69

Correlation Coefficient

Microsoft  Adyen NV

Excellent diversification

The 3 months correlation between Microsoft and Adyen is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV 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 Adyen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adyen NV has no effect on the direction of Microsoft i.e., Microsoft and Adyen NV go up and down completely randomly.

Pair Corralation between Microsoft and Adyen NV

Assuming the 90 days horizon Microsoft is expected to under-perform the Adyen NV. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.8 times less risky than Adyen NV. The stock trades about -0.08 of its potential returns per unit of risk. The Adyen NV is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  139,860  in Adyen NV on December 1, 2024 and sell it today you would earn a total of  29,220  from holding Adyen NV or generate 20.89% return on investment over 90 days.

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

Microsoft  vs.  Adyen NV

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Adyen NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Adyen NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Adyen NV

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

The idea behind Microsoft and Adyen NV 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.