Correlation Between Shift4 Payments and Microsoft Corp

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Can any of the company-specific risk be diversified away by investing in both Shift4 Payments and Microsoft Corp 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 Shift4 Payments and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shift4 Payments and Microsoft Corp, you can compare the effects of market volatilities on Shift4 Payments and Microsoft Corp 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 Shift4 Payments with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shift4 Payments and Microsoft Corp.

Diversification Opportunities for Shift4 Payments and Microsoft Corp

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Shift4 and Microsoft is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shift4 Payments and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and Shift4 Payments 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 Shift4 Payments are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of Shift4 Payments i.e., Shift4 Payments and Microsoft Corp go up and down completely randomly.

Pair Corralation between Shift4 Payments and Microsoft Corp

Given the investment horizon of 90 days Shift4 Payments is expected to generate 2.24 times more return on investment than Microsoft Corp. However, Shift4 Payments is 2.24 times more volatile than Microsoft Corp. It trades about 0.01 of its potential returns per unit of risk. Microsoft Corp is currently generating about -0.07 per unit of risk. If you would invest  5,202  in Shift4 Payments on June 28, 2022 and sell it today you would lose (804.00)  from holding Shift4 Payments or give up 15.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Shift4 Payments  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
Shift4 Payments 
Shift4 Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Shift4 Payments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Shift4 Payments reported solid returns over the last few months and may actually be approaching a breakup point.

Shift4 Price Channel

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Shift4 Payments and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shift4 Payments and Microsoft Corp

The main advantage of trading using opposite Shift4 Payments and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shift4 Payments position performs unexpectedly, Microsoft Corp 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 Corp will offset losses from the drop in Microsoft Corp's long position.
Shift4 Payments vs. Industrias Bachoco SA
The idea behind Shift4 Payments and Microsoft Corp 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.
Microsoft Corp vs. Industrias Bachoco SA
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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