Correlation Between Microsoft and Toray Industries

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

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

Diversification Opportunities for Microsoft and Toray Industries

-0.36

Correlation Coefficient

Microsoft  Toray Industries

Very good diversification

The 3 months correlation between Microsoft and Toray is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Toray Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toray Industries 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 Toray Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toray Industries has no effect on the direction of Microsoft i.e., Microsoft and Toray Industries go up and down completely randomly.

Pair Corralation between Microsoft and Toray Industries

Given the investment horizon of 90 days Microsoft is expected to under-perform the Toray Industries. In addition to that, Microsoft is 1.33 times more volatile than Toray Industries. It trades about -0.08 of its total potential returns per unit of risk. Toray Industries is currently generating about 0.13 per unit of volatility. If you would invest  607.00  in Toray Industries on December 2, 2024 and sell it today you would earn a total of  42.00  from holding Toray Industries or generate 6.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.33%
Values	Daily Returns

Microsoft  vs.  Toray Industries

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.

Toray Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toray Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Toray Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and Toray Industries

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

The idea behind Microsoft and Toray Industries 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.