Correlation Between Microsoft and Sysco Corp

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

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

Diversification Opportunities for Microsoft and Sysco Corp

0.87

Correlation Coefficient

Microsoft  Sysco Corp

Very poor diversification

The 3 months correlation between Microsoft and Sysco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sysco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sysco Corp 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 Sysco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sysco Corp has no effect on the direction of Microsoft i.e., Microsoft and Sysco Corp go up and down completely randomly.

Pair Corralation between Microsoft and Sysco Corp

Assuming the 90 days trading horizon Microsoft is expected to generate 1.46 times more return on investment than Sysco Corp. However, Microsoft is 1.46 times more volatile than Sysco Corp. It trades about 0.11 of its potential returns per unit of risk. Sysco Corp is currently generating about 0.12 per unit of risk. If you would invest  37,531  in Microsoft on October 8, 2024 and sell it today you would earn a total of  3,604  from holding Microsoft or generate 9.6% return on investment over 90 days.

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

Microsoft  vs.  Sysco Corp

Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) 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.

Sysco Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sysco Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Sysco Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Microsoft and Sysco Corp

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

The idea behind Microsoft and Sysco Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.