Correlation Between Microsoft and Green Technology

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

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

Diversification Opportunities for Microsoft and Green Technology

0.35

Correlation Coefficient

Microsoft  Green Technology

Weak diversification

The 3 months correlation between Microsoft and Green is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Green Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Technology Metals 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 Green Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Technology Metals has no effect on the direction of Microsoft i.e., Microsoft and Green Technology go up and down completely randomly.

Pair Corralation between Microsoft and Green Technology

Given the investment horizon of 90 days Microsoft is expected to under-perform the Green Technology. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.92 times less risky than Green Technology. The stock trades about -0.08 of its potential returns per unit of risk. The Green Technology Metals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5.70  in Green Technology Metals on December 1, 2024 and sell it today you would lose (0.70) from holding Green Technology Metals or give up 12.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  Green Technology Metals

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.

Green Technology Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Green Technology Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Green Technology 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 Green Technology

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

The idea behind Microsoft and Green Technology Metals 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.