Correlation Between Microsoft and Ratos AB

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

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

Diversification Opportunities for Microsoft and Ratos AB

-0.49

Correlation Coefficient

Microsoft  Ratos AB

Very good diversification

The 3 months correlation between Microsoft and Ratos is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ratos AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratos 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 Ratos AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratos AB has no effect on the direction of Microsoft i.e., Microsoft and Ratos AB go up and down completely randomly.

Pair Corralation between Microsoft and Ratos AB

Given the investment horizon of 90 days Microsoft is expected to under-perform the Ratos AB. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.31 times less risky than Ratos AB. The stock trades about -0.1 of its potential returns per unit of risk. The Ratos AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,458  in Ratos AB on December 31, 2024 and sell it today you would earn a total of  42.00  from holding Ratos AB or generate 1.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  Ratos 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.

Ratos AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ratos AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ratos AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Ratos AB

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

The idea behind Microsoft and Ratos 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.