Correlation Between Microsoft and Wipro

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

Diversification Opportunities for Microsoft and Wipro

MicrosoftWiproDiversified AwayMicrosoftWiproDiversified Away100%
0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Microsoft and Wipro is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Wipro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro 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 Wipro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro has no effect on the direction of Microsoft i.e., Microsoft and Wipro go up and down completely randomly.

Pair Corralation between Microsoft and Wipro

Assuming the 90 days trading horizon Microsoft is expected to generate 0.93 times more return on investment than Wipro. However, Microsoft is 1.08 times less risky than Wipro. It trades about -0.28 of its potential returns per unit of risk. Wipro is currently generating about -0.27 per unit of risk. If you would invest  42,650  in Microsoft on November 30, 2024 and sell it today you would lose (4,490) from holding Microsoft or give up 10.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  Wipro

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 051015
JavaScript chart by amCharts 3.21.15MSF WIOA
       Timeline  
Microsoft 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb380390400410420430
Wipro 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Wipro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Wipro is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.13.23.33.43.53.6

Microsoft and Wipro Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.65-1.99-1.32-0.650.00.641.291.942.59 0.080.100.120.14
JavaScript chart by amCharts 3.21.15MSF WIOA
       Returns  

Pair Trading with Microsoft and Wipro

The main advantage of trading using opposite Microsoft and Wipro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Wipro 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 Wipro will offset losses from the drop in Wipro's long position.
The idea behind Microsoft and Wipro 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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