Correlation Between Microsoft and Groupama Entreprises

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

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

Diversification Opportunities for Microsoft and Groupama Entreprises

0.62

Correlation Coefficient

Microsoft  Groupama Entreprises

Poor diversification

The 3 months correlation between Microsoft and Groupama is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Groupama Entreprises N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupama Entreprises 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 Groupama Entreprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupama Entreprises has no effect on the direction of Microsoft i.e., Microsoft and Groupama Entreprises go up and down completely randomly.

Pair Corralation between Microsoft and Groupama Entreprises

Given the investment horizon of 90 days Microsoft is expected to generate 97.34 times more return on investment than Groupama Entreprises. However, Microsoft is 97.34 times more volatile than Groupama Entreprises N. It trades about 0.13 of its potential returns per unit of risk. Groupama Entreprises N is currently generating about 0.98 per unit of risk. If you would invest  40,554  in Microsoft on October 1, 2024 and sell it today you would earn a total of  2,499  from holding Microsoft or generate 6.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.86%
Values	Daily Returns

Microsoft  vs.  Groupama Entreprises N

Microsoft

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Groupama Entreprises

Risk-Adjusted Performance

77 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Groupama Entreprises N are ranked lower than 77 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Groupama Entreprises is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Groupama Entreprises

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

The idea behind Microsoft and Groupama Entreprises N 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.