Correlation Between Microsoft and Masimo

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

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

Diversification Opportunities for Microsoft and Masimo

0.2

Correlation Coefficient

Microsoft  Masimo

Modest diversification

The 3 months correlation between Microsoft and Masimo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Masimo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masimo 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 Masimo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masimo has no effect on the direction of Microsoft i.e., Microsoft and Masimo go up and down completely randomly.

Pair Corralation between Microsoft and Masimo

Given the investment horizon of 90 days Microsoft is expected to generate 0.34 times more return on investment than Masimo. However, Microsoft is 2.94 times less risky than Masimo. It trades about 0.36 of its potential returns per unit of risk. Masimo is currently generating about -0.04 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 Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Masimo

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.

Masimo

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Microsoft and Masimo

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

The idea behind Microsoft and Masimo 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.