Correlation Between Microsoft and MSP Recovery

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

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

Diversification Opportunities for Microsoft and MSP Recovery

-0.91

Correlation Coefficient

Microsoft  MSP Recovery

Pay attention - limited upside

The 3 months correlation between Microsoft and MSP is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Microsoft i.e., Microsoft and MSP Recovery go up and down completely randomly.

Pair Corralation between Microsoft and MSP Recovery

Given the investment horizon of 90 days Microsoft is expected to generate 0.22 times more return on investment than MSP Recovery. However, Microsoft is 4.48 times less risky than MSP Recovery. It trades about 0.35 of its potential returns per unit of risk. MSP Recovery is currently generating about -0.17 per unit of risk. If you would invest  39,113  in Microsoft on April 25, 2025 and sell it today you would earn a total of  11,474  from holding Microsoft or generate 29.34% return on investment over 90 days.

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

Microsoft  vs.  MSP Recovery

Microsoft

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 27 (%) 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.

MSP Recovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in August 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Microsoft and MSP Recovery

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

The idea behind Microsoft and MSP Recovery 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.