Correlation Between Microsoft and Regal Beloit

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

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

Diversification Opportunities for Microsoft and Regal Beloit

0.93

Correlation Coefficient

Microsoft  Regal Beloit

Almost no diversification

The 3 months correlation between Microsoft and Regal is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Regal Beloit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Beloit 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 Regal Beloit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Beloit has no effect on the direction of Microsoft i.e., Microsoft and Regal Beloit go up and down completely randomly.

Pair Corralation between Microsoft and Regal Beloit

Given the investment horizon of 90 days Microsoft is expected to generate 0.7 times more return on investment than Regal Beloit. However, Microsoft is 1.43 times less risky than Regal Beloit. It trades about -0.08 of its potential returns per unit of risk. Regal Beloit is currently generating about -0.16 per unit of risk. If you would invest  42,398  in Microsoft on December 29, 2024 and sell it today you would lose (3,340) from holding Microsoft or give up 7.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Regal Beloit

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.

Regal Beloit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regal Beloit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Microsoft and Regal Beloit

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

The idea behind Microsoft and Regal Beloit 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..