Correlation Between Upstart Holdings and MicroStrategy Incorporated

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

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

Diversification Opportunities for Upstart Holdings and MicroStrategy Incorporated

0.81

Correlation Coefficient

Upstart Holdings  MicroStrategy Incorporated

Very poor diversification

The 3 months correlation between Upstart and MicroStrategy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Upstart Holdings and MicroStrategy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroStrategy Incorporated and Upstart Holdings 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 Upstart Holdings are associated (or correlated) with MicroStrategy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroStrategy Incorporated has no effect on the direction of Upstart Holdings i.e., Upstart Holdings and MicroStrategy Incorporated go up and down completely randomly.

Pair Corralation between Upstart Holdings and MicroStrategy Incorporated

Given the investment horizon of 90 days Upstart Holdings is expected to generate 1.58 times less return on investment than MicroStrategy Incorporated. But when comparing it to its historical volatility, Upstart Holdings is 1.0 times less risky than MicroStrategy Incorporated. It trades about 0.09 of its potential returns per unit of risk. MicroStrategy Incorporated is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  23,434  in MicroStrategy Incorporated on October 25, 2024 and sell it today you would earn a total of  14,297  from holding MicroStrategy Incorporated or generate 61.01% return on investment over 90 days.

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

Upstart Holdings  vs.  MicroStrategy Incorporated

Upstart Holdings

Risk-Adjusted Performance

7 of 100

Modest

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

MicroStrategy Incorporated

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Upstart Holdings and MicroStrategy Incorporated

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

The idea behind Upstart Holdings and MicroStrategy Incorporated 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.