Correlation Between Microsoft and Horizon Technology

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

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

Diversification Opportunities for Microsoft and Horizon Technology

0.47

Correlation Coefficient

Microsoft  Horizon Technology

Very weak diversification

The 3 months correlation between Microsoft and Horizon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Horizon Technology Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Technology 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 Horizon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Technology has no effect on the direction of Microsoft i.e., Microsoft and Horizon Technology go up and down completely randomly.

Pair Corralation between Microsoft and Horizon Technology

Given the investment horizon of 90 days Microsoft is expected to under-perform the Horizon Technology. In addition to that, Microsoft is 2.02 times more volatile than Horizon Technology Finance. It trades about -0.22 of its total potential returns per unit of risk. Horizon Technology Finance is currently generating about 0.07 per unit of volatility. If you would invest  2,433  in Horizon Technology Finance on October 8, 2024 and sell it today you would earn a total of  17.00  from holding Horizon Technology Finance or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Microsoft  vs.  Horizon Technology Finance

Microsoft

Risk-Adjusted Performance

2 of 100

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Horizon Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Technology Finance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Horizon Technology is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Horizon Technology

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

The idea behind Microsoft and Horizon Technology Finance 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.