Correlation Between Microsoft and ZW Data

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

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

Diversification Opportunities for Microsoft and ZW Data

-0.12

Correlation Coefficient

Microsoft  ZW Data

Good diversification

The 3 months correlation between Microsoft and CNET is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ZW Data Action in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZW Data Action 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 ZW Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZW Data Action has no effect on the direction of Microsoft i.e., Microsoft and ZW Data go up and down completely randomly.

Pair Corralation between Microsoft and ZW Data

Given the investment horizon of 90 days Microsoft is expected to generate 0.16 times more return on investment than ZW Data. However, Microsoft is 6.1 times less risky than ZW Data. It trades about 0.36 of its potential returns per unit of risk. ZW Data Action is currently generating about 0.04 per unit of risk. If you would invest  38,659  in Microsoft on April 24, 2025 and sell it today you would earn a total of  11,928  from holding Microsoft or generate 30.85% return on investment over 90 days.

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

Microsoft  vs.  ZW Data Action

Microsoft

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 28 (%) 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.

ZW Data Action

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZW Data Action are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, ZW Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and ZW Data

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

The idea behind Microsoft and ZW Data Action 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.