Correlation Between Microsoft and Custom Truck

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

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

Diversification Opportunities for Microsoft and Custom Truck

0.88

Correlation Coefficient

Microsoft  Custom Truck

Very poor diversification

The 3 months correlation between Microsoft and Custom is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Custom Truck One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Custom Truck One 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 Custom Truck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Custom Truck One has no effect on the direction of Microsoft i.e., Microsoft and Custom Truck go up and down completely randomly.

Pair Corralation between Microsoft and Custom Truck

Given the investment horizon of 90 days Microsoft is expected to generate 1.15 times less return on investment than Custom Truck. But when comparing it to its historical volatility, Microsoft is 2.13 times less risky than Custom Truck. It trades about 0.36 of its potential returns per unit of risk. Custom Truck One is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  434.00  in Custom Truck One on April 25, 2025 and sell it today you would earn a total of  147.00  from holding Custom Truck One or generate 33.87% return on investment over 90 days.

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

Microsoft  vs.  Custom Truck One

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.

Custom Truck One

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Custom Truck One are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Custom Truck unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Custom Truck

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

The idea behind Microsoft and Custom Truck One 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.