Correlation Between Microsoft and State Street

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

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

Diversification Opportunities for Microsoft and State Street

0.97

Correlation Coefficient

Microsoft  State Street

Almost no diversification

The 3 months correlation between Microsoft and State is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and State Street Premier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Premier 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Premier has no effect on the direction of Microsoft i.e., Microsoft and State Street go up and down completely randomly.

Pair Corralation between Microsoft and State Street

Given the investment horizon of 90 days Microsoft is expected to generate 1.01 times less return on investment than State Street. In addition to that, Microsoft is 1.22 times more volatile than State Street Premier. It trades about 0.2 of its total potential returns per unit of risk. State Street Premier is currently generating about 0.25 per unit of volatility. If you would invest  11,571  in State Street Premier on May 20, 2025 and sell it today you would earn a total of  1,524  from holding State Street Premier or generate 13.17% 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.  State Street Premier

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 15 (%) 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.

State Street Premier

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Premier are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, State Street showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and State Street

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

The idea behind Microsoft and State Street Premier 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 Stocks Directory module to find actively traded stocks across global markets.