Correlation Between Microsoft and Wetzel SA

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

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

Diversification Opportunities for Microsoft and Wetzel SA

-0.04

Correlation Coefficient

Microsoft  Wetzel SA

Good diversification

The 3 months correlation between Microsoft and Wetzel is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Wetzel SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wetzel SA 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 Wetzel SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wetzel SA has no effect on the direction of Microsoft i.e., Microsoft and Wetzel SA go up and down completely randomly.

Pair Corralation between Microsoft and Wetzel SA

Given the investment horizon of 90 days Microsoft is expected to generate 15.98 times less return on investment than Wetzel SA. But when comparing it to its historical volatility, Microsoft is 5.71 times less risky than Wetzel SA. It trades about 0.05 of its potential returns per unit of risk. Wetzel SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  920.00  in Wetzel SA on September 3, 2024 and sell it today you would earn a total of  579.00  from holding Wetzel SA or generate 62.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Wetzel SA

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Wetzel SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wetzel SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wetzel SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Wetzel SA

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

The idea behind Microsoft and Wetzel SA 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 Transaction History module to view history of all your transactions and understand their impact on performance.