Correlation Between Microsoft and United Hero

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

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

Diversification Opportunities for Microsoft and United Hero

0.28

Correlation Coefficient

Microsoft  United Hero

Modest diversification

The 3 months correlation between Microsoft and United is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and United Hero ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Hero ETF 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 United Hero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Hero ETF has no effect on the direction of Microsoft i.e., Microsoft and United Hero go up and down completely randomly.

Pair Corralation between Microsoft and United Hero

Given the investment horizon of 90 days Microsoft is expected to generate 0.8 times more return on investment than United Hero. However, Microsoft is 1.25 times less risky than United Hero. It trades about 0.22 of its potential returns per unit of risk. United Hero ETF is currently generating about 0.17 per unit of risk. If you would invest  41,287  in Microsoft on September 22, 2024 and sell it today you would earn a total of  2,373  from holding Microsoft or generate 5.75% return on investment over 90 days.

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

Microsoft  vs.  United Hero ETF

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

United Hero ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Hero ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, United Hero sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and United Hero

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

The idea behind Microsoft and United Hero ETF 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 CEOs Directory module to screen CEOs from public companies around the world.