Correlation Between Microsoft and Treace Medical

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

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

Diversification Opportunities for Microsoft and Treace Medical

-0.75

Correlation Coefficient

Microsoft  Treace Medical

Pay attention - limited upside

The 3 months correlation between Microsoft and Treace is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Treace Medical Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treace Medical Concepts 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 Treace Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treace Medical Concepts has no effect on the direction of Microsoft i.e., Microsoft and Treace Medical go up and down completely randomly.

Pair Corralation between Microsoft and Treace Medical

Given the investment horizon of 90 days Microsoft is expected to generate 0.29 times more return on investment than Treace Medical. However, Microsoft is 3.4 times less risky than Treace Medical. It trades about 0.37 of its potential returns per unit of risk. Treace Medical Concepts is currently generating about -0.15 per unit of risk. If you would invest  43,537  in Microsoft on May 3, 2025 and sell it today you would earn a total of  9,813  from holding Microsoft or generate 22.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  Treace Medical Concepts

Microsoft

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 29 (%) 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.

Treace Medical Concepts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treace Medical Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in September 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Microsoft and Treace Medical

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

The idea behind Microsoft and Treace Medical Concepts 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.