Correlation Between Microsoft and Glucose Health

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

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

Diversification Opportunities for Microsoft and Glucose Health

0.74

Correlation Coefficient

Microsoft  Glucose Health

Poor diversification

The 3 months correlation between Microsoft and Glucose is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Glucose Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glucose Health 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 Glucose Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glucose Health has no effect on the direction of Microsoft i.e., Microsoft and Glucose Health go up and down completely randomly.

Pair Corralation between Microsoft and Glucose Health

Given the investment horizon of 90 days Microsoft is expected to under-perform the Glucose Health. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 5.52 times less risky than Glucose Health. The stock trades about -0.11 of its potential returns per unit of risk. The Glucose Health is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Glucose Health on December 29, 2024 and sell it today you would lose (3.00) from holding Glucose Health or give up 25.0% of portfolio value over 90 days.

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

Microsoft  vs.  Glucose Health

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Glucose Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glucose Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Glucose Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and Glucose Health

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

The idea behind Microsoft and Glucose Health 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.