Correlation Between Microsoft and NetApp
Can any of the company-specific risk be diversified away by investing in both Microsoft and NetApp 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 NetApp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NetApp Inc, you can compare the effects of market volatilities on Microsoft and NetApp 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 NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NetApp.
Diversification Opportunities for Microsoft and NetApp
Very good diversification
The 3 months correlation between Microsoft and NetApp is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Microsoft i.e., Microsoft and NetApp go up and down completely randomly.
Pair Corralation between Microsoft and NetApp
Given the investment horizon of 90 days Microsoft is expected to generate 3.8 times less return on investment than NetApp. But when comparing it to its historical volatility, Microsoft is 1.66 times less risky than NetApp. It trades about 0.04 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,645 in NetApp Inc on July 27, 2025 and sell it today you would earn a total of 1,019 from holding NetApp Inc or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. NetApp Inc
Performance |
| Timeline |
| Microsoft |
| NetApp Inc |
Microsoft and NetApp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and NetApp
The main advantage of trading using opposite Microsoft and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.| Microsoft vs. Apple Inc | Microsoft vs. NVIDIA | Microsoft vs. Alphabet Inc Class A | Microsoft vs. FatPipe, Common Stock |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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