Correlation Between Microsoft and Viatris

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

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

Diversification Opportunities for Microsoft and Viatris

0.79

Correlation Coefficient

Microsoft  Viatris

Poor diversification

The 3 months correlation between Microsoft and Viatris is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Viatris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viatris 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 Viatris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viatris has no effect on the direction of Microsoft i.e., Microsoft and Viatris go up and down completely randomly.

Pair Corralation between Microsoft and Viatris

Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than Viatris. However, Microsoft is 2.25 times less risky than Viatris. It trades about 0.32 of its potential returns per unit of risk. Viatris is currently generating about 0.04 per unit of risk. If you would invest  43,537  in Microsoft on May 4, 2025 and sell it today you would earn a total of  8,874  from holding Microsoft or generate 20.38% return on investment over 90 days.

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

Microsoft  vs.  Viatris

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 25 (%) 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.

Viatris

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Viatris is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Viatris

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

The idea behind Microsoft and Viatris 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.