Correlation Between Microsoft and UBS Plc

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

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

Diversification Opportunities for Microsoft and UBS Plc

0.74

Correlation Coefficient

Microsoft  UBS Plc

Poor diversification

The 3 months correlation between Microsoft and UBS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UBS plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS plc 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 UBS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS plc has no effect on the direction of Microsoft i.e., Microsoft and UBS Plc go up and down completely randomly.

Pair Corralation between Microsoft and UBS Plc

Given the investment horizon of 90 days Microsoft is expected to under-perform the UBS Plc. In addition to that, Microsoft is 1.46 times more volatile than UBS plc . It trades about -0.11 of its total potential returns per unit of risk. UBS plc is currently generating about -0.12 per unit of volatility. If you would invest  9,122  in UBS plc on December 30, 2024 and sell it today you would lose (789.00) from holding UBS plc or give up 8.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Microsoft  vs.  UBS plc

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.

UBS plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Microsoft and UBS Plc

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

The idea behind Microsoft and UBS plc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.