Correlation Between Microsoft and Artivion

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

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

Diversification Opportunities for Microsoft and Artivion

-0.08

Correlation Coefficient

Microsoft  Artivion

Good diversification

The 3 months correlation between Microsoft and Artivion is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Artivion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artivion 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 Artivion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artivion has no effect on the direction of Microsoft i.e., Microsoft and Artivion go up and down completely randomly.

Pair Corralation between Microsoft and Artivion

Given the investment horizon of 90 days Microsoft is expected to generate 0.81 times more return on investment than Artivion. However, Microsoft is 1.24 times less risky than Artivion. It trades about 0.08 of its potential returns per unit of risk. Artivion is currently generating about 0.02 per unit of risk. If you would invest  41,612  in Microsoft on August 17, 2024 and sell it today you would earn a total of  1,077  from holding Microsoft or generate 2.59% return on investment over 90 days.

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

Microsoft  vs.  Artivion

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Artivion

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Artivion are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Artivion may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Microsoft and Artivion

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

The idea behind Microsoft and Artivion 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.