Correlation Between Microsoft and Paragon GmbH

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

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

Diversification Opportunities for Microsoft and Paragon GmbH

-0.11

Correlation Coefficient

Microsoft  Paragon GmbH

Good diversification

The 3 months correlation between Microsoft and Paragon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and paragon GmbH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on paragon GmbH 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 Paragon GmbH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of paragon GmbH has no effect on the direction of Microsoft i.e., Microsoft and Paragon GmbH go up and down completely randomly.

Pair Corralation between Microsoft and Paragon GmbH

Assuming the 90 days trading horizon Microsoft is expected to generate 0.25 times more return on investment than Paragon GmbH. However, Microsoft is 4.01 times less risky than Paragon GmbH. It trades about 0.11 of its potential returns per unit of risk. paragon GmbH Co is currently generating about 0.01 per unit of risk. If you would invest  37,316  in Microsoft on October 8, 2024 and sell it today you would earn a total of  3,754  from holding Microsoft or generate 10.06% return on investment over 90 days.

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

Microsoft  vs.  paragon GmbH Co

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 comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

paragon GmbH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days paragon GmbH Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Paragon GmbH is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Paragon GmbH

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

The idea behind Microsoft and paragon GmbH Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.