Correlation Between Microsoft and KOBE STEEL

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

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

Diversification Opportunities for Microsoft and KOBE STEEL

-0.85

Correlation Coefficient

Microsoft  KOBE STEEL

Pay attention - limited upside

The 3 months correlation between Microsoft and KOBE is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KOBE STEEL LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOBE STEEL LTD 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 KOBE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOBE STEEL LTD has no effect on the direction of Microsoft i.e., Microsoft and KOBE STEEL go up and down completely randomly.

Pair Corralation between Microsoft and KOBE STEEL

Assuming the 90 days trading horizon Microsoft is expected to under-perform the KOBE STEEL. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.41 times less risky than KOBE STEEL. The stock trades about -0.16 of its potential returns per unit of risk. The KOBE STEEL LTD is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  902.00  in KOBE STEEL LTD on December 22, 2024 and sell it today you would earn a total of  259.00  from holding KOBE STEEL LTD or generate 28.71% return on investment over 90 days.

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

Microsoft  vs.  KOBE STEEL LTD

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 weak performance in the last few months, the Stock's basic 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.

KOBE STEEL LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KOBE STEEL LTD are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, KOBE STEEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and KOBE STEEL

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

The idea behind Microsoft and KOBE STEEL LTD 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.