Correlation Between Microsoft and Sharp

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

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

Diversification Opportunities for Microsoft and Sharp

-0.43

Correlation Coefficient

Microsoft  Sharp

Very good diversification

The 3 months correlation between Microsoft and Sharp is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sharp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharp 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 Sharp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharp has no effect on the direction of Microsoft i.e., Microsoft and Sharp go up and down completely randomly.

Pair Corralation between Microsoft and Sharp

Given the investment horizon of 90 days Microsoft is expected to generate 0.36 times more return on investment than Sharp. However, Microsoft is 2.81 times less risky than Sharp. It trades about 0.36 of its potential returns per unit of risk. Sharp is currently generating about -0.16 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 Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  Sharp

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.

Sharp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sharp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and Sharp

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

The idea behind Microsoft and Sharp 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 CEOs Directory module to screen CEOs from public companies around the world.