Correlation Between Microsoft and Multimanager Lifestyle

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

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

Diversification Opportunities for Microsoft and Multimanager Lifestyle

0.96

Correlation Coefficient

Microsoft  Multimanager Lifestyle

Almost no diversification

The 3 months correlation between Microsoft and Multimanager is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Multimanager Lifestyle Moderat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Microsoft i.e., Microsoft and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Microsoft and Multimanager Lifestyle

Given the investment horizon of 90 days Microsoft is expected to generate 2.49 times more return on investment than Multimanager Lifestyle. However, Microsoft is 2.49 times more volatile than Multimanager Lifestyle Moderate. It trades about 0.36 of its potential returns per unit of risk. Multimanager Lifestyle Moderate is currently generating about 0.26 per unit of risk. If you would invest  43,448  in Microsoft on May 2, 2025 and sell it today you would earn a total of  7,876  from holding Microsoft or generate 18.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  Multimanager Lifestyle Moderat

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.

Multimanager Lifestyle

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Moderate are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Multimanager Lifestyle

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

The idea behind Microsoft and Multimanager Lifestyle Moderate 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 Transaction History module to view history of all your transactions and understand their impact on performance.