Correlation Between Microsoft and New Germany

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

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

Diversification Opportunities for Microsoft and New Germany

0.85

Correlation Coefficient

Microsoft  New Germany

Very poor diversification

The 3 months correlation between Microsoft and New is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and New Germany Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Germany Closed 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 New Germany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Germany Closed has no effect on the direction of Microsoft i.e., Microsoft and New Germany go up and down completely randomly.

Pair Corralation between Microsoft and New Germany

Given the investment horizon of 90 days Microsoft is expected to generate 0.88 times more return on investment than New Germany. However, Microsoft is 1.13 times less risky than New Germany. It trades about 0.32 of its potential returns per unit of risk. New Germany Closed is currently generating about 0.09 per unit of risk. If you would invest  43,537  in Microsoft on May 4, 2025 and sell it today you would earn a total of  8,874  from holding Microsoft or generate 20.38% return on investment over 90 days.

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

Microsoft  vs.  New Germany Closed

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 25 (%) 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.

New Germany Closed

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Germany Closed are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable technical and fundamental indicators, New Germany is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and New Germany

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

The idea behind Microsoft and New Germany Closed 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.