Correlation Between Microsoft and Core Laboratories

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

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

Diversification Opportunities for Microsoft and Core Laboratories

0.19

Correlation Coefficient

Microsoft  Core Laboratories

Average diversification

The 3 months correlation between Microsoft and Core is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Core Laboratories NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Laboratories 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 Core Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Laboratories has no effect on the direction of Microsoft i.e., Microsoft and Core Laboratories go up and down completely randomly.

Pair Corralation between Microsoft and Core Laboratories

Given the investment horizon of 90 days Microsoft is expected to generate 0.26 times more return on investment than Core Laboratories. However, Microsoft is 3.86 times less risky than Core Laboratories. It trades about 0.37 of its potential returns per unit of risk. Core Laboratories NV is currently generating about -0.02 per unit of risk. If you would invest  43,256  in Microsoft on May 7, 2025 and sell it today you would earn a total of  10,308  from holding Microsoft or generate 23.83% return on investment over 90 days.

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

Microsoft  vs.  Core Laboratories NV

Microsoft

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

Core Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core Laboratories NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Core Laboratories is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Core Laboratories

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

The idea behind Microsoft and Core Laboratories NV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.