Correlation Between Microsoft and COACH

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

By analyzing existing cross correlation between Microsoft and COACH INC 425, you can compare the effects of market volatilities on Microsoft and COACH 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 COACH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and COACH.

Diversification Opportunities for Microsoft and COACH

0.24

Correlation Coefficient

Microsoft  COACH

Modest diversification

The 3 months correlation between Microsoft and COACH is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and COACH INC 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COACH INC 425 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 COACH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COACH INC 425 has no effect on the direction of Microsoft i.e., Microsoft and COACH go up and down completely randomly.

Pair Corralation between Microsoft and COACH

Given the investment horizon of 90 days Microsoft is expected to under-perform the COACH. In addition to that, Microsoft is 2.8 times more volatile than COACH INC 425. It trades about -0.14 of its total potential returns per unit of risk. COACH INC 425 is currently generating about 0.0 per unit of volatility. If you would invest  9,960  in COACH INC 425 on December 5, 2024 and sell it today you would earn a total of  6.00  from holding COACH INC 425 or generate 0.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Microsoft  vs.  COACH INC 425

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

COACH INC 425

Risk-Adjusted Performance

Very Weak

Over the last 90 days COACH INC 425 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COACH is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and COACH

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

The idea behind Microsoft and COACH INC 425 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.