Correlation Between Health Care and Microsoft
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Select and Microsoft, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Microsoft.
Diversification Opportunities for Health Care and Microsoft
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Health and Microsoft is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Health Care 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 Health Care Select 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 Health Care i.e., Health Care and Microsoft go up and down completely randomly.
Pair Corralation between Health Care and Microsoft
Considering the 90-day investment horizon Health Care Select is expected to generate 0.8 times more return on investment than Microsoft. However, Health Care Select is 1.25 times less risky than Microsoft. It trades about 0.21 of its potential returns per unit of risk. Microsoft is currently generating about -0.07 per unit of risk. If you would invest 13,268 in Health Care Select on August 13, 2025 and sell it today you would earn a total of 1,460 from holding Health Care Select or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Health Care Select vs. Microsoft
Performance |
| Timeline |
| Health Care Select |
| Microsoft |
Health Care and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Microsoft
The main advantage of trading using opposite Health Care and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. Vanguard Health Care | Health Care vs. Schwab Broad Market | Health Care vs. Vanguard European Stock | Health Care vs. SPDR Dow Jones |
| Microsoft vs. METISA Metalrgica Timboense | Microsoft vs. Lloyds Banking Group | Microsoft vs. Truist Financial | Microsoft vs. Metalrgica Riosulense SA |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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