Correlation Between Microsoft and Vaisala Oyj

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

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

Diversification Opportunities for Microsoft and Vaisala Oyj

0.26

Correlation Coefficient

Microsoft  Vaisala Oyj

Modest diversification

The 3 months correlation between Microsoft and Vaisala is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Vaisala Oyj A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaisala Oyj A 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 Vaisala Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaisala Oyj A has no effect on the direction of Microsoft i.e., Microsoft and Vaisala Oyj go up and down completely randomly.

Pair Corralation between Microsoft and Vaisala Oyj

Given the investment horizon of 90 days Microsoft is expected to under-perform the Vaisala Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.56 times less risky than Vaisala Oyj. The stock trades about -0.03 of its potential returns per unit of risk. The Vaisala Oyj A is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,005  in Vaisala Oyj A on September 28, 2024 and sell it today you would earn a total of  850.00  from holding Vaisala Oyj A or generate 21.22% 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.  Vaisala Oyj A

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Vaisala Oyj A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaisala Oyj A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Vaisala Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Microsoft and Vaisala Oyj

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

The idea behind Microsoft and Vaisala Oyj A 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.