Correlation Between Microsoft Corp and Visa

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

Diversification Opportunities for Microsoft Corp and Visa

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Microsoft and Visa is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Visa go up and down completely randomly.

Pair Corralation between Microsoft Corp and Visa

Given the investment horizon of 90 days Microsoft Corp is expected to generate 1.21 times more return on investment than Visa. However, Microsoft Corp is 1.21 times more volatile than Visa Inc. It trades about 0.1 of its potential returns per unit of risk. Visa Inc is currently generating about 0.03 per unit of risk. If you would invest  23,148  in Microsoft Corp on August 31, 2022 and sell it today you would earn a total of  1,028  from holding Microsoft Corp or generate 4.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Microsoft Corp  vs.  Visa Inc

 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 comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Visa Inc 
Visa Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Visa Price Channel

Microsoft Corp and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and Visa

The main advantage of trading using opposite Microsoft Corp and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.
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The idea behind Microsoft Corp and Visa Inc 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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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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