Correlation Between Microsoft and Compagnie

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

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

Diversification Opportunities for Microsoft and Compagnie

-0.84

Correlation Coefficient

Microsoft  Compagnie

Pay attention - limited upside

The 3 months correlation between Microsoft and Compagnie is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint 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 Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Microsoft i.e., Microsoft and Compagnie go up and down completely randomly.

Pair Corralation between Microsoft and Compagnie

Assuming the 90 days trading horizon Microsoft is expected to under-perform the Compagnie. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.42 times less risky than Compagnie. The stock trades about -0.14 of its potential returns per unit of risk. The Compagnie de Saint Gobain is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,604  in Compagnie de Saint Gobain on December 24, 2024 and sell it today you would earn a total of  1,392  from holding Compagnie de Saint Gobain or generate 16.18% return on investment over 90 days.

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

Microsoft  vs.  Compagnie de Saint Gobain

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. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Compagnie de Saint

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental drivers, Compagnie displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Compagnie

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

The idea behind Microsoft and Compagnie de Saint Gobain 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.