Correlation Between Microsoft and Net 1

Can any of the company-specific risk be diversified away by investing in both Microsoft and Net 1 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 Net 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Net 1 Ueps, you can compare the effects of market volatilities on Microsoft and Net 1 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 Net 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Net 1.

Diversification Opportunities for Microsoft and Net 1

-0.43

Correlation Coefficient

Microsoft  Net 1

Very good diversification

The 3 months correlation between Microsoft and Net is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Net 1 Ueps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net 1 Ueps 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 Net 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net 1 Ueps has no effect on the direction of Microsoft i.e., Microsoft and Net 1 go up and down completely randomly.

Pair Corralation between Microsoft and Net 1

Assuming the 90 days trading horizon Microsoft is expected to generate 0.54 times more return on investment than Net 1. However, Microsoft is 1.86 times less risky than Net 1. It trades about 0.31 of its potential returns per unit of risk. Net 1 Ueps is currently generating about 0.02 per unit of risk. If you would invest  31,703  in Microsoft on April 20, 2025 and sell it today you would earn a total of  12,102  from holding Microsoft or generate 38.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Net 1 Ueps

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

Net 1 Ueps

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Net 1 Ueps are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Net 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Net 1

The main advantage of trading using opposite Microsoft and Net 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Net 1 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 Net 1 will offset losses from the drop in Net 1's long position.

The idea behind Microsoft and Net 1 Ueps 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.