Correlation Between Microsoft and SOUL

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

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

Diversification Opportunities for Microsoft and SOUL

-0.93

Correlation Coefficient

Microsoft  SOUL

Pay attention - limited upside

The 3 months correlation between Microsoft and SOUL is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SOUL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUL 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 SOUL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUL has no effect on the direction of Microsoft i.e., Microsoft and SOUL go up and down completely randomly.

Pair Corralation between Microsoft and SOUL

Given the investment horizon of 90 days Microsoft is expected to generate 0.15 times more return on investment than SOUL. However, Microsoft is 6.66 times less risky than SOUL. It trades about 0.21 of its potential returns per unit of risk. SOUL is currently generating about -0.11 per unit of risk. If you would invest  45,887  in Microsoft on May 18, 2025 and sell it today you would earn a total of  6,130  from holding Microsoft or generate 13.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Microsoft  vs.  SOUL

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 16 (%) 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.

SOUL

Risk-Adjusted Performance

Weakest

Over the last 90 days SOUL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for SOUL shareholders.

Pair Trading with Microsoft and SOUL

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

The idea behind Microsoft and SOUL 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.