Correlation Between Microsoft and PROSIEBENSAT1 MEDIADR4/

Can any of the company-specific risk be diversified away by investing in both Microsoft and PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4/ into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and PROSIEBENSAT1 MEDIADR4, you can compare the effects of market volatilities on Microsoft and PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4/. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PROSIEBENSAT1 MEDIADR4/.

Diversification Opportunities for Microsoft and PROSIEBENSAT1 MEDIADR4/

-0.51

Correlation Coefficient

Microsoft  PROSIEBENSAT1 MEDIADR4/

Excellent diversification

The 3 months correlation between Microsoft and PROSIEBENSAT1 is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PROSIEBENSAT1 MEDIADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4/. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROSIEBENSAT1 MEDIADR4/ has no effect on the direction of Microsoft i.e., Microsoft and PROSIEBENSAT1 MEDIADR4/ go up and down completely randomly.

Pair Corralation between Microsoft and PROSIEBENSAT1 MEDIADR4/

Assuming the 90 days trading horizon Microsoft is expected to generate 0.53 times more return on investment than PROSIEBENSAT1 MEDIADR4/. However, Microsoft is 1.89 times less risky than PROSIEBENSAT1 MEDIADR4/. It trades about 0.11 of its potential returns per unit of risk. PROSIEBENSAT1 MEDIADR4 is currently generating about 0.03 per unit of risk. If you would invest  38,724  in Microsoft on September 14, 2024 and sell it today you would earn a total of  3,926  from holding Microsoft or generate 10.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  PROSIEBENSAT1 MEDIADR4

Microsoft

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PROSIEBENSAT1 MEDIADR4/

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PROSIEBENSAT1 MEDIADR4 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, PROSIEBENSAT1 MEDIADR4/ is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and PROSIEBENSAT1 MEDIADR4/

The main advantage of trading using opposite Microsoft and PROSIEBENSAT1 MEDIADR4/ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PROSIEBENSAT1 MEDIADR4/ 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 PROSIEBENSAT1 MEDIADR4/ will offset losses from the drop in PROSIEBENSAT1 MEDIADR4/'s long position.

The idea behind Microsoft and PROSIEBENSAT1 MEDIADR4 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.