Correlation Between Microsoft and Amdocs

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

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

Diversification Opportunities for Microsoft and Amdocs

-0.64

Correlation Coefficient

Microsoft  Amdocs

Excellent diversification

The 3 months correlation between Microsoft and Amdocs is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Amdocs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amdocs 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 Amdocs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amdocs has no effect on the direction of Microsoft i.e., Microsoft and Amdocs go up and down completely randomly.

Pair Corralation between Microsoft and Amdocs

Given the investment horizon of 90 days Microsoft is expected to generate 0.78 times more return on investment than Amdocs. However, Microsoft is 1.28 times less risky than Amdocs. It trades about 0.27 of its potential returns per unit of risk. Amdocs is currently generating about -0.05 per unit of risk. If you would invest  45,313  in Microsoft on May 15, 2025 and sell it today you would earn a total of  7,611  from holding Microsoft or generate 16.8% return on investment over 90 days.

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

Microsoft  vs.  Amdocs

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 20 (%) 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.

Amdocs

Risk-Adjusted Performance

Weakest

Over the last 90 days Amdocs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Amdocs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Amdocs

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

The idea behind Microsoft and Amdocs 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.