Correlation Between Microsoft and Robit Oyj

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

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

Diversification Opportunities for Microsoft and Robit Oyj

-0.37

Correlation Coefficient

Microsoft  Robit Oyj

Very good diversification

The 3 months correlation between Microsoft and Robit is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Robit Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robit Oyj 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 Robit Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robit Oyj has no effect on the direction of Microsoft i.e., Microsoft and Robit Oyj go up and down completely randomly.

Pair Corralation between Microsoft and Robit Oyj

Given the investment horizon of 90 days Microsoft is expected to generate 0.47 times more return on investment than Robit Oyj. However, Microsoft is 2.13 times less risky than Robit Oyj. It trades about 0.08 of its potential returns per unit of risk. Robit Oyj is currently generating about -0.05 per unit of risk. If you would invest  26,324  in Microsoft on September 29, 2024 and sell it today you would earn a total of  16,729  from holding Microsoft or generate 63.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Microsoft  vs.  Robit Oyj

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

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.

Robit Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Robit Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Microsoft and Robit Oyj

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

The idea behind Microsoft and Robit Oyj 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.