Correlation Between Microsoft Corp and Uber Technologies

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

Diversification Opportunities for Microsoft Corp and Uber Technologies

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Microsoft and Uber Technologies is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Uber Technologies go up and down completely randomly.

Pair Corralation between Microsoft Corp and Uber Technologies

Given the investment horizon of 90 days Microsoft Corp is expected to under-perform the Uber Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft Corp is 1.85 times less risky than Uber Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The Uber Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,889  in Uber Technologies on July 6, 2022 and sell it today you would earn a total of  30.00  from holding Uber Technologies or generate 1.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Uber Technologies

 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Uber Technologies 
Uber Technologies Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Uber Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Uber Technologies Price Channel

Microsoft Corp and Uber Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and Uber Technologies

The main advantage of trading using opposite Microsoft Corp and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.
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The idea behind Microsoft Corp and Uber Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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