Correlation Between Microsoft and Maider Medical

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

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

Diversification Opportunities for Microsoft and Maider Medical

-0.04

Correlation Coefficient

Microsoft  Maider Medical

Good diversification

The 3 months correlation between Microsoft and Maider is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Maider Medical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maider Medical Industry 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 Maider Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maider Medical Industry has no effect on the direction of Microsoft i.e., Microsoft and Maider Medical go up and down completely randomly.

Pair Corralation between Microsoft and Maider Medical

Given the investment horizon of 90 days Microsoft is expected to generate 0.36 times more return on investment than Maider Medical. However, Microsoft is 2.78 times less risky than Maider Medical. It trades about -0.03 of its potential returns per unit of risk. Maider Medical Industry is currently generating about -0.01 per unit of risk. If you would invest  45,754  in Microsoft on September 30, 2024 and sell it today you would lose (2,701) from holding Microsoft or give up 5.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Microsoft  vs.  Maider Medical Industry

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Maider Medical Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maider Medical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microsoft and Maider Medical

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

The idea behind Microsoft and Maider Medical Industry 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.