Correlation Between Microsoft and Simplify Equity

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

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

Diversification Opportunities for Microsoft and Simplify Equity

0.96

Correlation Coefficient

Microsoft  Simplify Equity

Almost no diversification

The 3 months correlation between Microsoft and Simplify is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Microsoft i.e., Microsoft and Simplify Equity go up and down completely randomly.

Pair Corralation between Microsoft and Simplify Equity

Given the investment horizon of 90 days Microsoft is expected to generate 1.12 times less return on investment than Simplify Equity. In addition to that, Microsoft is 1.2 times more volatile than Simplify Equity PLUS. It trades about 0.08 of its total potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.1 per unit of volatility. If you would invest  2,398  in Simplify Equity PLUS on May 10, 2025 and sell it today you would earn a total of  1,862  from holding Simplify Equity PLUS or generate 77.65% return on investment over 90 days.

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

Microsoft  vs.  Simplify Equity PLUS

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 20 (%) 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.

Simplify Equity PLUS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Simplify Equity may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Microsoft and Simplify Equity

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

The idea behind Microsoft and Simplify Equity PLUS 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.