Correlation Between Microsoft and Pool

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

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

Diversification Opportunities for Microsoft and Pool

0.14

Correlation Coefficient

Microsoft  Pool

Average diversification

The 3 months correlation between Microsoft and Pool is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool 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 Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of Microsoft i.e., Microsoft and Pool go up and down completely randomly.

Pair Corralation between Microsoft and Pool

Given the investment horizon of 90 days Microsoft is expected to generate 0.53 times more return on investment than Pool. However, Microsoft is 1.88 times less risky than Pool. It trades about 0.25 of its potential returns per unit of risk. Pool Corporation is currently generating about 0.04 per unit of risk. If you would invest  45,313  in Microsoft on May 15, 2025 and sell it today you would earn a total of  7,129  from holding Microsoft or generate 15.73% return on investment over 90 days.

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

Microsoft  vs.  Pool Corp.

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 19 (%) 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.

Pool

Risk-Adjusted Performance

Weakest

Compared to the overall equity markets, risk-adjusted returns on investments in Pool Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Pool is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and Pool

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

The idea behind Microsoft and Pool Corporation 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.