Correlation Between Microsoft and COMTECH TELECOMM

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

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

Diversification Opportunities for Microsoft and COMTECH TELECOMM

0.4

Correlation Coefficient

Microsoft  COMTECH TELECOMM

Very weak diversification

The 3 months correlation between Microsoft and COMTECH is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and COMTECH TELECOMM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMTECH TELECOMM 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 COMTECH TELECOMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMTECH TELECOMM has no effect on the direction of Microsoft i.e., Microsoft and COMTECH TELECOMM go up and down completely randomly.

Pair Corralation between Microsoft and COMTECH TELECOMM

Assuming the 90 days trading horizon Microsoft is expected to generate 0.19 times more return on investment than COMTECH TELECOMM. However, Microsoft is 5.22 times less risky than COMTECH TELECOMM. It trades about 0.03 of its potential returns per unit of risk. COMTECH TELECOMM is currently generating about 0.0 per unit of risk. If you would invest  33,559  in Microsoft on August 25, 2025 and sell it today you would earn a total of  7,586  from holding Microsoft or generate 22.6% return on investment over 90 days.

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

Microsoft  vs.  COMTECH TELECOMM

Microsoft

Risk-Adjusted Performance

Weakest

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 basic indicators, Microsoft is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

COMTECH TELECOMM

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in COMTECH TELECOMM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, COMTECH TELECOMM unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and COMTECH TELECOMM

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

The idea behind Microsoft and COMTECH TELECOMM 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.