Correlation Between Microsoft and Proximus

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

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

Diversification Opportunities for Microsoft and Proximus

-0.24

Correlation Coefficient

Microsoft  Proximus

Very good diversification

The 3 months correlation between Microsoft and Proximus is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Proximus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proximus NV 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 Proximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proximus NV has no effect on the direction of Microsoft i.e., Microsoft and Proximus go up and down completely randomly.

Pair Corralation between Microsoft and Proximus

Given the investment horizon of 90 days Microsoft is expected to generate 0.68 times more return on investment than Proximus. However, Microsoft is 1.48 times less risky than Proximus. It trades about 0.06 of its potential returns per unit of risk. Proximus NV is currently generating about -0.18 per unit of risk. If you would invest  42,973  in Microsoft on September 13, 2024 and sell it today you would earn a total of  1,974  from holding Microsoft or generate 4.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Proximus NV

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

Proximus NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proximus NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Microsoft and Proximus

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

The idea behind Microsoft and Proximus NV 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.