Correlation Between Microsoft and Integrated Diagnostics

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

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

Diversification Opportunities for Microsoft and Integrated Diagnostics

0.09

Correlation Coefficient

Microsoft  Integrated Diagnostics

Significant diversification

The 3 months correlation between Microsoft and Integrated is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Integrated Diagnostics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Diagnostics 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 Integrated Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Diagnostics has no effect on the direction of Microsoft i.e., Microsoft and Integrated Diagnostics go up and down completely randomly.

Pair Corralation between Microsoft and Integrated Diagnostics

Given the investment horizon of 90 days Microsoft is expected to generate 0.41 times more return on investment than Integrated Diagnostics. However, Microsoft is 2.46 times less risky than Integrated Diagnostics. It trades about 0.09 of its potential returns per unit of risk. Integrated Diagnostics Holdings is currently generating about 0.0 per unit of risk. If you would invest  25,262  in Microsoft on September 26, 2024 and sell it today you would earn a total of  18,671  from holding Microsoft or generate 73.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.37%
Values	Daily Returns

Microsoft  vs.  Integrated Diagnostics Holding

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.

Integrated Diagnostics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Diagnostics Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Integrated Diagnostics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Integrated Diagnostics

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

The idea behind Microsoft and Integrated Diagnostics Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.