Correlation Between Microsoft and CompoSecure

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

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

Diversification Opportunities for Microsoft and CompoSecure

0.94

Correlation Coefficient

Microsoft  CompoSecure

Almost no diversification

The 3 months correlation between Microsoft and CompoSecure is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Microsoft i.e., Microsoft and CompoSecure go up and down completely randomly.

Pair Corralation between Microsoft and CompoSecure

Given the investment horizon of 90 days Microsoft is expected to generate 2.09 times less return on investment than CompoSecure. But when comparing it to its historical volatility, Microsoft is 2.53 times less risky than CompoSecure. It trades about 0.44 of its potential returns per unit of risk. CompoSecure is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  344.00  in CompoSecure on April 21, 2025 and sell it today you would earn a total of  357.00  from holding CompoSecure or generate 103.78% return on investment over 90 days.

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

Microsoft  vs.  CompoSecure

Microsoft

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

CompoSecure

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CompoSecure showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and CompoSecure

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

The idea behind Microsoft and CompoSecure 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.