Correlation Between Zscaler and Microsoft

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

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

Diversification Opportunities for Zscaler and Microsoft

0.19

Correlation Coefficient

Zscaler  Microsoft

Average diversification

The 3 months correlation between Zscaler and Microsoft is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Zscaler and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Zscaler 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 Zscaler are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Zscaler i.e., Zscaler and Microsoft go up and down completely randomly.

Pair Corralation between Zscaler and Microsoft

Allowing for the 90-day total investment horizon Zscaler is expected to generate 1.61 times more return on investment than Microsoft. However, Zscaler is 1.61 times more volatile than Microsoft. It trades about 0.06 of its potential returns per unit of risk. Microsoft is currently generating about -0.1 per unit of risk. If you would invest  19,124  in Zscaler on January 25, 2025 and sell it today you would earn a total of  1,890  from holding Zscaler or generate 9.88% return on investment over 90 days.

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

Zscaler  vs.  Microsoft

Zscaler

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zscaler are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Zscaler unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Zscaler and Microsoft

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

The idea behind Zscaler and Microsoft 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.