Correlation Between Microsoft and Hess Midstream

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

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

Diversification Opportunities for Microsoft and Hess Midstream

-0.63

Correlation Coefficient

Microsoft  Hess Midstream

Excellent diversification

The 3 months correlation between Microsoft and Hess is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hess Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess Midstream Partners 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 Hess Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess Midstream Partners has no effect on the direction of Microsoft i.e., Microsoft and Hess Midstream go up and down completely randomly.

Pair Corralation between Microsoft and Hess Midstream

Given the investment horizon of 90 days Microsoft is expected to under-perform the Hess Midstream. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.0 times less risky than Hess Midstream. The stock trades about -0.08 of its potential returns per unit of risk. The Hess Midstream Partners is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,639  in Hess Midstream Partners on December 29, 2024 and sell it today you would earn a total of  598.00  from holding Hess Midstream Partners or generate 16.43% return on investment over 90 days.

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

Microsoft  vs.  Hess Midstream Partners

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.

Hess Midstream Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hess Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Hess Midstream

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

The idea behind Microsoft and Hess Midstream Partners 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.