Correlation Between Microsoft and PPL

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

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

Diversification Opportunities for Microsoft and PPL

0.19

Correlation Coefficient

Microsoft  PPL

Average diversification

The 3 months correlation between Microsoft and PPL is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Microsoft i.e., Microsoft and PPL go up and down completely randomly.

Pair Corralation between Microsoft and PPL

Given the investment horizon of 90 days Microsoft is expected to generate 3.66 times less return on investment than PPL. In addition to that, Microsoft is 1.13 times more volatile than PPL Corporation. It trades about 0.02 of its total potential returns per unit of risk. PPL Corporation is currently generating about 0.07 per unit of volatility. If you would invest  3,592  in PPL Corporation on July 21, 2025 and sell it today you would earn a total of  152.00  from holding PPL Corporation or generate 4.23% return on investment over 90 days.

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

Microsoft  vs.  PPL Corp.

Microsoft

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

PPL Corporation

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in PPL Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, PPL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and PPL

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

The idea behind Microsoft and PPL 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.