Correlation Between Microsoft and Visium Technologies

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

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

Diversification Opportunities for Microsoft and Visium Technologies

0.25

Correlation Coefficient

Microsoft  Visium Technologies

Modest diversification

The 3 months correlation between Microsoft and Visium is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Visium Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visium Technologies 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 Visium Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visium Technologies has no effect on the direction of Microsoft i.e., Microsoft and Visium Technologies go up and down completely randomly.

Pair Corralation between Microsoft and Visium Technologies

Given the investment horizon of 90 days Microsoft is expected to under-perform the Visium Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 10.84 times less risky than Visium Technologies. The stock trades about -0.08 of its potential returns per unit of risk. The Visium Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.27  in Visium Technologies on December 29, 2024 and sell it today you would earn a total of  0.07  from holding Visium Technologies or generate 25.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Microsoft  vs.  Visium Technologies

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.

Visium Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visium Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Visium Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Visium Technologies

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

The idea behind Microsoft and Visium Technologies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.