Correlation Between Microsoft and EVO Payments

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Can any of the company-specific risk be diversified away by investing in both Microsoft and EVO Payments 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 EVO Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and EVO Payments, you can compare the effects of market volatilities on Microsoft and EVO Payments 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 EVO Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and EVO Payments.

Diversification Opportunities for Microsoft and EVO Payments

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Microsoft and EVO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and EVO Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVO Payments 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 EVO Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVO Payments has no effect on the direction of Microsoft i.e., Microsoft and EVO Payments go up and down completely randomly.

Pair Corralation between Microsoft and EVO Payments

Given the investment horizon of 90 days Microsoft is expected to generate 2.17 times less return on investment than EVO Payments. But when comparing it to its historical volatility, Microsoft is 1.14 times less risky than EVO Payments. It trades about 0.05 of its potential returns per unit of risk. EVO Payments is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,217  in EVO Payments on December 29, 2023 and sell it today you would earn a total of  1,182  from holding EVO Payments or generate 53.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy48.89%
ValuesDaily Returns

Microsoft  vs.  EVO Payments

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

12 of 100

 
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High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.
EVO Payments 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days EVO Payments has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, EVO Payments is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Microsoft and EVO Payments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and EVO Payments

The main advantage of trading using opposite Microsoft and EVO Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, EVO Payments 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 EVO Payments will offset losses from the drop in EVO Payments' long position.
The idea behind Microsoft and EVO Payments 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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