Correlation Between Microsoft and Kaltura

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

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

Diversification Opportunities for Microsoft and Kaltura

0.11

Correlation Coefficient

Microsoft  Kaltura

Average diversification

The 3 months correlation between Microsoft and Kaltura is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Kaltura in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaltura 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 Kaltura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaltura has no effect on the direction of Microsoft i.e., Microsoft and Kaltura go up and down completely randomly.

Pair Corralation between Microsoft and Kaltura

Given the investment horizon of 90 days Microsoft is expected to generate 0.5 times more return on investment than Kaltura. However, Microsoft is 2.0 times less risky than Kaltura. It trades about 0.04 of its potential returns per unit of risk. Kaltura is currently generating about -0.13 per unit of risk. If you would invest  42,381  in Microsoft on February 28, 2024 and sell it today you would earn a total of  635.00  from holding Microsoft or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Microsoft  vs.  Kaltura

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.

Kaltura

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaltura has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Microsoft and Kaltura

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

The idea behind Microsoft and Kaltura 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.