Correlation Between Microsoft and Corbion NV

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

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

Diversification Opportunities for Microsoft and Corbion NV

-0.24

Correlation Coefficient

Microsoft  Corbion NV

Very good diversification

The 3 months correlation between Microsoft and Corbion is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Corbion NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corbion NV 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 Corbion NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corbion NV has no effect on the direction of Microsoft i.e., Microsoft and Corbion NV go up and down completely randomly.

Pair Corralation between Microsoft and Corbion NV

Given the investment horizon of 90 days Microsoft is expected to generate 0.79 times more return on investment than Corbion NV. However, Microsoft is 1.27 times less risky than Corbion NV. It trades about 0.01 of its potential returns per unit of risk. Corbion NV is currently generating about -0.09 per unit of risk. If you would invest  43,781  in Microsoft on September 19, 2024 and sell it today you would lose (42.00) from holding Microsoft or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Corbion NV

Microsoft

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Corbion NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corbion NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic 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 Microsoft and Corbion NV

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

The idea behind Microsoft and Corbion NV 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..