Correlation Between Microsoft and UNITED INTERNET

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

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

Diversification Opportunities for Microsoft and UNITED INTERNET

0.81

Correlation Coefficient

Microsoft  UNITED INTERNET

Very poor diversification

The 3 months correlation between Microsoft and UNITED is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and UNITED INTERNET N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED INTERNET N 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 UNITED INTERNET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED INTERNET N has no effect on the direction of Microsoft i.e., Microsoft and UNITED INTERNET go up and down completely randomly.

Pair Corralation between Microsoft and UNITED INTERNET

Assuming the 90 days trading horizon Microsoft is expected to generate 1.6 times less return on investment than UNITED INTERNET. But when comparing it to its historical volatility, Microsoft is 2.03 times less risky than UNITED INTERNET. It trades about 0.23 of its potential returns per unit of risk. UNITED INTERNET N is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,896  in UNITED INTERNET N on May 6, 2025 and sell it today you would earn a total of  572.00  from holding UNITED INTERNET N or generate 30.17% return on investment over 90 days.

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

Microsoft  vs.  UNITED INTERNET N

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

UNITED INTERNET N

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED INTERNET N are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, UNITED INTERNET unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and UNITED INTERNET

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

The idea behind Microsoft and UNITED INTERNET N 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.