Correlation Between Microsoft and Victory Capital

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

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

Diversification Opportunities for Microsoft and Victory Capital

0.67

Correlation Coefficient

Microsoft  Victory Capital

Poor diversification

The 3 months correlation between Microsoft and Victory is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Victory Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Capital Holdings 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 Victory Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Capital Holdings has no effect on the direction of Microsoft i.e., Microsoft and Victory Capital go up and down completely randomly.

Pair Corralation between Microsoft and Victory Capital

Given the investment horizon of 90 days Microsoft is expected to generate 0.68 times more return on investment than Victory Capital. However, Microsoft is 1.48 times less risky than Victory Capital. It trades about -0.11 of its potential returns per unit of risk. Victory Capital Holdings is currently generating about -0.08 per unit of risk. If you would invest  42,398  in Microsoft on December 30, 2024 and sell it today you would lose (4,518) from holding Microsoft or give up 10.66% of portfolio value over 90 days.

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

Microsoft  vs.  Victory Capital Holdings

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.

Victory Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Microsoft and Victory Capital

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

The idea behind Microsoft and Victory Capital Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.