Correlation Between Microsoft and UbiSoft Entertainment

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

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

Diversification Opportunities for Microsoft and UbiSoft Entertainment

-0.5

Correlation Coefficient

Microsoft  UbiSoft Entertainment

Very good diversification

The 3 months correlation between Microsoft and UbiSoft is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UbiSoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UbiSoft Entertainment 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 UbiSoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UbiSoft Entertainment has no effect on the direction of Microsoft i.e., Microsoft and UbiSoft Entertainment go up and down completely randomly.

Pair Corralation between Microsoft and UbiSoft Entertainment

Given the investment horizon of 90 days Microsoft is expected to under-perform the UbiSoft Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.63 times less risky than UbiSoft Entertainment. The stock trades about -0.11 of its potential returns per unit of risk. The UbiSoft Entertainment is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  273.00  in UbiSoft Entertainment on December 30, 2024 and sell it today you would lose (1.00) from holding UbiSoft Entertainment or give up 0.37% of portfolio value over 90 days.

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

Microsoft  vs.  UbiSoft Entertainment

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.

UbiSoft Entertainment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UbiSoft Entertainment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, UbiSoft Entertainment 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 UbiSoft Entertainment

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

The idea behind Microsoft and UbiSoft Entertainment 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.