Correlation Between Microsoft and Linamar

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

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

Diversification Opportunities for Microsoft and Linamar

0.92

Correlation Coefficient

Microsoft  Linamar

Almost no diversification

The 3 months correlation between Microsoft and Linamar is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Microsoft i.e., Microsoft and Linamar go up and down completely randomly.

Pair Corralation between Microsoft and Linamar

Given the investment horizon of 90 days Microsoft is expected to generate 1.37 times less return on investment than Linamar. But when comparing it to its historical volatility, Microsoft is 2.05 times less risky than Linamar. It trades about 0.37 of its potential returns per unit of risk. Linamar is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,722  in Linamar on May 3, 2025 and sell it today you would earn a total of  1,143  from holding Linamar or generate 30.71% 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.  Linamar

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.

Linamar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Linamar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Linamar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Linamar

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

The idea behind Microsoft and Linamar 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.