Correlation Between Microsoft and Outfront Media

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

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

Diversification Opportunities for Microsoft and Outfront Media

-0.12

Correlation Coefficient

Microsoft  Outfront Media

Good diversification

The 3 months correlation between Microsoft and Outfront is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Outfront Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outfront Media 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 Outfront Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outfront Media has no effect on the direction of Microsoft i.e., Microsoft and Outfront Media go up and down completely randomly.

Pair Corralation between Microsoft and Outfront Media

Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than Outfront Media. However, Microsoft is 1.45 times less risky than Outfront Media. It trades about 0.0 of its potential returns per unit of risk. Outfront Media is currently generating about -0.2 per unit of risk. If you would invest  42,551  in Microsoft on March 10, 2024 and sell it today you would lose (166.00) from holding Microsoft or give up 0.39% of portfolio value over 90 days.

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

Microsoft  vs.  Outfront Media

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Outfront Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outfront Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Outfront Media

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

The idea behind Microsoft and Outfront Media 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.