Correlation Between Microsoft Corp and Medical Facilities

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

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

Diversification Opportunities for Microsoft Corp and Medical Facilities

0.71

Correlation Coefficient

Microsoft Corp  Medical Facilities

Poor diversification

The 3 months correlation between Microsoft and Medical is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities and Microsoft Corp 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 Corp CDR are associated (or correlated) with Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Medical Facilities go up and down completely randomly.

Pair Corralation between Microsoft Corp and Medical Facilities

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 1.21 times more return on investment than Medical Facilities. However, Microsoft Corp is 1.21 times more volatile than Medical Facilities. It trades about 0.39 of its potential returns per unit of risk. Medical Facilities is currently generating about 0.05 per unit of risk. If you would invest  2,601  in Microsoft Corp CDR on April 21, 2025 and sell it today you would earn a total of  1,074  from holding Microsoft Corp CDR or generate 41.29% return on investment over 90 days.

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

Microsoft Corp CDR  vs.  Medical Facilities

Microsoft Corp CDR

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Microsoft Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Medical Facilities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Medical Facilities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft Corp and Medical Facilities

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

The idea behind Microsoft Corp CDR and Medical Facilities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.