Correlation Between Microsoft and All Asset

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

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

Diversification Opportunities for Microsoft and All Asset

0.48

Correlation Coefficient

Microsoft  All Asset

Very weak diversification

The 3 months correlation between Microsoft and All is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and All Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Asset Fund 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 All Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Asset Fund has no effect on the direction of Microsoft i.e., Microsoft and All Asset go up and down completely randomly.

Pair Corralation between Microsoft and All Asset

Given the investment horizon of 90 days Microsoft is expected to generate 3.95 times more return on investment than All Asset. However, Microsoft is 3.95 times more volatile than All Asset Fund. It trades about 0.41 of its potential returns per unit of risk. All Asset Fund is currently generating about 0.2 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  13,636  from holding Microsoft or generate 36.49% return on investment over 90 days.

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

Microsoft  vs.  All Asset Fund

Microsoft

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 31 (%) 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.

All Asset Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in All Asset Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, All Asset 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 All Asset

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

The idea behind Microsoft and All Asset Fund 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.