Correlation Between Identiv and Microsoft

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

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

Diversification Opportunities for Identiv and Microsoft

0.76

Correlation Coefficient

Identiv  Microsoft

Poor diversification

The 3 months correlation between Identiv and Microsoft is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Identiv and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Identiv 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 Identiv 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 Identiv i.e., Identiv and Microsoft go up and down completely randomly.

Pair Corralation between Identiv and Microsoft

Assuming the 90 days trading horizon Identiv is expected to generate 1.86 times more return on investment than Microsoft. However, Identiv is 1.86 times more volatile than Microsoft. It trades about 0.12 of its potential returns per unit of risk. Microsoft is currently generating about 0.07 per unit of risk. If you would invest  297.00  in Identiv on September 2, 2024 and sell it today you would earn a total of  63.00  from holding Identiv or generate 21.21% return on investment over 90 days.

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

Identiv  vs.  Microsoft

Identiv

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Identiv are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Identiv reported solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Identiv and Microsoft

The main advantage of trading using opposite Identiv and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Identiv 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 Identiv 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.