Correlation Between Nutrien and Microsoft

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

Diversification Opportunities for Nutrien and Microsoft

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Nutrien and Microsoft is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nutrien and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Nutrien 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 Nutrien are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Nutrien i.e., Nutrien and Microsoft go up and down completely randomly.

Pair Corralation between Nutrien and Microsoft

Considering the 90-day investment horizon Nutrien is expected to generate 1.61 times less return on investment than Microsoft. In addition to that, Nutrien is 1.23 times more volatile than Microsoft. It trades about 0.14 of its total potential returns per unit of risk. Microsoft is currently generating about 0.28 per unit of volatility. If you would invest  22,077  in Microsoft on September 5, 2022 and sell it today you would earn a total of  3,425  from holding Microsoft or generate 15.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Nutrien  vs.  Microsoft

 Performance (%) 
Nutrien Performance
0 of 100
Over the last 90 days Nutrien has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Nutrien Price Channel

Microsoft Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Microsoft Price Channel

Nutrien and Microsoft Volatility Contrast

   Predicted Return Density   

Pair Trading with Nutrien and Microsoft

The main advantage of trading using opposite Nutrien and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nutrien position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
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The idea behind Nutrien and Microsoft 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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