Correlation Between Microsoft and Graph

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

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

Diversification Opportunities for Microsoft and Graph

-0.19

Correlation Coefficient

Microsoft  Graph

Good diversification

The 3 months correlation between Microsoft and Graph is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and The Graph in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graph 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 Graph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graph has no effect on the direction of Microsoft i.e., Microsoft and Graph go up and down completely randomly.

Pair Corralation between Microsoft and Graph

Given the investment horizon of 90 days Microsoft is expected to generate 0.23 times more return on investment than Graph. However, Microsoft is 4.29 times less risky than Graph. It trades about 0.39 of its potential returns per unit of risk. The Graph is currently generating about 0.07 per unit of risk. If you would invest  37,370  in Microsoft on April 23, 2025 and sell it today you would earn a total of  13,157  from holding Microsoft or generate 35.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Microsoft  vs.  The Graph

Microsoft

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 30 (%) 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.

Graph

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Graph are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Graph exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Graph

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

The idea behind Microsoft and The Graph 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.