Correlation Between Microsoft and Dimensional Targeted

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

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

Diversification Opportunities for Microsoft and Dimensional Targeted

0.9

Correlation Coefficient

Microsoft  Dimensional Targeted

Almost no diversification

The 3 months correlation between Microsoft and Dimensional is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted 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 Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of Microsoft i.e., Microsoft and Dimensional Targeted go up and down completely randomly.

Pair Corralation between Microsoft and Dimensional Targeted

Given the investment horizon of 90 days Microsoft is expected to generate 0.73 times more return on investment than Dimensional Targeted. However, Microsoft is 1.36 times less risky than Dimensional Targeted. It trades about 0.37 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.12 per unit of risk. If you would invest  43,537  in Microsoft on May 3, 2025 and sell it today you would earn a total of  9,813  from holding Microsoft or generate 22.54% 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.  Dimensional Targeted Value

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 weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dimensional Targeted

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dimensional Targeted may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Microsoft and Dimensional Targeted

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

The idea behind Microsoft and Dimensional Targeted Value 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.