Correlation Between Microsoft Corp and Shift4 Payments

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

Diversification Opportunities for Microsoft Corp and Shift4 Payments

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Microsoft and Shift4 is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Shift4 Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shift4 Payments 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 are associated (or correlated) with Shift4 Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shift4 Payments has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Shift4 Payments go up and down completely randomly.

Pair Corralation between Microsoft Corp and Shift4 Payments

Given the investment horizon of 90 days Microsoft Corp is expected to generate 0.39 times more return on investment than Shift4 Payments. However, Microsoft Corp is 2.6 times less risky than Shift4 Payments. It trades about -0.05 of its potential returns per unit of risk. Shift4 Payments is currently generating about -0.15 per unit of risk. If you would invest  27,187  in Microsoft Corp on March 29, 2022 and sell it today you would lose (698.00)  from holding Microsoft Corp or give up 2.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Shift4 Payments

 Performance (%) 
      Timeline 
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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in July 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-06-09
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

Shift4 Payments 
Shift4 Performance
0 of 100
Over the last 90 days Shift4 Payments has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Shift4 Price Channel

Microsoft Corp and Shift4 Payments Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Microsoft Corp and Shift4 Payments

The main advantage of trading using opposite Microsoft Corp and Shift4 Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Shift4 Payments 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 Shift4 Payments will offset losses from the drop in Shift4 Payments' long position.
The idea behind Microsoft Corp and Shift4 Payments 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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