Correlation Between Microsoft and Nexoptic Technology

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

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

Diversification Opportunities for Microsoft and Nexoptic Technology

0.78

Correlation Coefficient

Microsoft  Nexoptic Technology

Poor diversification

The 3 months correlation between Microsoft and Nexoptic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nexoptic Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexoptic Technology Corp 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 Nexoptic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexoptic Technology Corp has no effect on the direction of Microsoft i.e., Microsoft and Nexoptic Technology go up and down completely randomly.

Pair Corralation between Microsoft and Nexoptic Technology

Given the investment horizon of 90 days Microsoft is expected to under-perform the Nexoptic Technology. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 12.53 times less risky than Nexoptic Technology. The stock trades about -0.11 of its potential returns per unit of risk. The Nexoptic Technology Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Nexoptic Technology Corp on December 30, 2024 and sell it today you would lose (0.50) from holding Nexoptic Technology Corp or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  Nexoptic Technology Corp

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.

Nexoptic Technology Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexoptic Technology Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nexoptic Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Nexoptic Technology

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

The idea behind Microsoft and Nexoptic Technology Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.