Correlation Between Microsoft and Wasatch International

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

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

Diversification Opportunities for Microsoft and Wasatch International

0.18

Correlation Coefficient

Microsoft  Wasatch International

Average diversification

The 3 months correlation between Microsoft and Wasatch is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Wasatch International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch International 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 Wasatch International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch International has no effect on the direction of Microsoft i.e., Microsoft and Wasatch International go up and down completely randomly.

Pair Corralation between Microsoft and Wasatch International

Given the investment horizon of 90 days Microsoft is expected to generate 0.61 times more return on investment than Wasatch International. However, Microsoft is 1.63 times less risky than Wasatch International. It trades about -0.08 of its potential returns per unit of risk. Wasatch International Growth is currently generating about -0.12 per unit of risk. If you would invest  43,012  in Microsoft on December 1, 2024 and sell it today you would lose (3,313) from holding Microsoft or give up 7.7% of portfolio value over 90 days.

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

Microsoft  vs.  Wasatch International Growth

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.

Wasatch International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch International Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Microsoft and Wasatch International

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

The idea behind Microsoft and Wasatch International Growth 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.