Correlation Between Splunk and Microsoft

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

By analyzing existing cross correlation between Splunk Inc and Microsoft, you can compare the effects of market volatilities on Splunk and Microsoft 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 Splunk with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Splunk and Microsoft.

Diversification Opportunities for Splunk and Microsoft

0.0

Correlation Coefficient

Splunk  Microsoft

Pay attention - limited upside

The 3 months correlation between Splunk and Microsoft is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Splunk Inc and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Splunk 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 Splunk Inc are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Splunk i.e., Splunk and Microsoft go up and down completely randomly.

Pair Corralation between Splunk and Microsoft

If you would invest (100.00) in Splunk Inc on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Splunk Inc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Splunk Inc  vs.  Microsoft

Splunk Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Splunk Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Splunk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with Splunk and Microsoft

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

The idea behind Splunk Inc and Microsoft 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.