Correlation Between Microsoft and Razen SA

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

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

Diversification Opportunities for Microsoft and Razen SA

-0.77

Correlation Coefficient

Microsoft  Razen SA

Pay attention - limited upside

The 3 months correlation between Microsoft and Razen is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Razen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Razen 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 Razen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Razen SA has no effect on the direction of Microsoft i.e., Microsoft and Razen SA go up and down completely randomly.

Pair Corralation between Microsoft and Razen SA

Assuming the 90 days trading horizon Microsoft is expected to generate 0.6 times more return on investment than Razen SA. However, Microsoft is 1.66 times less risky than Razen SA. It trades about 0.15 of its potential returns per unit of risk. Razen SA is currently generating about -0.14 per unit of risk. If you would invest  9,873  in Microsoft on September 16, 2024 and sell it today you would earn a total of  1,405  from holding Microsoft or generate 14.23% return on investment over 90 days.

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

Microsoft  vs.  Razen SA

Microsoft

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Razen SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Razen SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Razen SA

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

The idea behind Microsoft and Razen 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.