Correlation Between Microsoft and Space

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

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

Diversification Opportunities for Microsoft and Space

-0.46

Correlation Coefficient

Microsoft  Space

Very good diversification

The 3 months correlation between Microsoft and Space is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Space Com in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Com 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 Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Com has no effect on the direction of Microsoft i.e., Microsoft and Space go up and down completely randomly.

Pair Corralation between Microsoft and Space

Given the investment horizon of 90 days Microsoft is expected to generate 0.27 times more return on investment than Space. However, Microsoft is 3.68 times less risky than Space. It trades about 0.09 of its potential returns per unit of risk. Space Com is currently generating about -0.07 per unit of risk. If you would invest  24,867  in Microsoft on October 23, 2024 and sell it today you would earn a total of  18,036  from holding Microsoft or generate 72.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.73%
Values	Daily Returns

Microsoft  vs.  Space Com

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Space Com

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Space Com has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Space 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 Space

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

The idea behind Microsoft and Space Com 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.