Correlation Between Microsoft and WisdomTree

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

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

Diversification Opportunities for Microsoft and WisdomTree

0.61

Correlation Coefficient

Microsoft  WisdomTree

Poor diversification

The 3 months correlation between Microsoft and WisdomTree is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and WisdomTree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree 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 WisdomTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree has no effect on the direction of Microsoft i.e., Microsoft and WisdomTree go up and down completely randomly.

Pair Corralation between Microsoft and WisdomTree

Given the investment horizon of 90 days Microsoft is expected to generate 0.82 times more return on investment than WisdomTree. However, Microsoft is 1.22 times less risky than WisdomTree. It trades about 0.21 of its potential returns per unit of risk. WisdomTree 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 Together
Strength	Significant
Accuracy	41.94%
Values	Daily Returns

Microsoft  vs.  WisdomTree

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.

WisdomTree

Risk-Adjusted Performance

Fair

Over the last 90 days WisdomTree has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively inconsistent basic indicators, WisdomTree may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Microsoft and WisdomTree

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

The idea behind Microsoft and WisdomTree 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.