Correlation Between Microsoft and MAG Interactive

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

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

Diversification Opportunities for Microsoft and MAG Interactive

0.29

Correlation Coefficient

Microsoft  MAG Interactive

Modest diversification

The 3 months correlation between Microsoft and MAG is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MAG Interactive AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG Interactive AB 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 MAG Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG Interactive AB has no effect on the direction of Microsoft i.e., Microsoft and MAG Interactive go up and down completely randomly.

Pair Corralation between Microsoft and MAG Interactive

Given the investment horizon of 90 days Microsoft is expected to under-perform the MAG Interactive. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.32 times less risky than MAG Interactive. The stock trades about -0.1 of its potential returns per unit of risk. The MAG Interactive AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  855.00  in MAG Interactive AB on December 22, 2024 and sell it today you would earn a total of  19.00  from holding MAG Interactive AB or generate 2.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Microsoft  vs.  MAG Interactive AB

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.

MAG Interactive AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Interactive AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MAG Interactive may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and MAG Interactive

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

The idea behind Microsoft and MAG Interactive AB 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.