Correlation Between Microsoft and Valiant Holding

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

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

Diversification Opportunities for Microsoft and Valiant Holding

0.66

Correlation Coefficient

Microsoft  Valiant Holding

Poor diversification

The 3 months correlation between Microsoft and Valiant is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Valiant Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valiant Holding AG 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 Valiant Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valiant Holding AG has no effect on the direction of Microsoft i.e., Microsoft and Valiant Holding go up and down completely randomly.

Pair Corralation between Microsoft and Valiant Holding

Given the investment horizon of 90 days Microsoft is expected to generate 1.48 times more return on investment than Valiant Holding. However, Microsoft is 1.48 times more volatile than Valiant Holding AG. It trades about 0.09 of its potential returns per unit of risk. Valiant Holding AG is currently generating about 0.06 per unit of risk. If you would invest  31,876  in Microsoft on September 26, 2024 and sell it today you would earn a total of  12,057  from holding Microsoft or generate 37.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

Microsoft  vs.  Valiant Holding AG

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Valiant Holding AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valiant Holding AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Valiant Holding is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Microsoft and Valiant Holding

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

The idea behind Microsoft and Valiant Holding AG 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.