Correlation Between Microsoft and Scottish Mortgage
Can any of the company-specific risk be diversified away by investing in both Microsoft and Scottish Mortgage 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 Scottish Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Scottish Mortgage Investment, you can compare the effects of market volatilities on Microsoft and Scottish Mortgage 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 Scottish Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Scottish Mortgage.
Diversification Opportunities for Microsoft and Scottish Mortgage
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Scottish is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Scottish Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottish Mortgage 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 Scottish Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottish Mortgage has no effect on the direction of Microsoft i.e., Microsoft and Scottish Mortgage go up and down completely randomly.
Pair Corralation between Microsoft and Scottish Mortgage
Assuming the 90 days trading horizon Microsoft is expected to generate 0.93 times more return on investment than Scottish Mortgage. However, Microsoft is 1.07 times less risky than Scottish Mortgage. It trades about 0.09 of its potential returns per unit of risk. Scottish Mortgage Investment is currently generating about 0.05 per unit of risk. If you would invest 23,558 in Microsoft on October 28, 2024 and sell it today you would earn a total of 18,777 from holding Microsoft or generate 79.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Scottish Mortgage Investment
Performance |
| Timeline |
| Microsoft |
| Scottish Mortgage |
Microsoft and Scottish Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Scottish Mortgage
The main advantage of trading using opposite Microsoft and Scottish Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Scottish Mortgage 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 Scottish Mortgage will offset losses from the drop in Scottish Mortgage's long position.| Microsoft vs. International Consolidated Airlines | Microsoft vs. AEGEAN AIRLINES | Microsoft vs. SINGAPORE AIRLINES | Microsoft vs. American Airlines Group |
| Scottish Mortgage vs. Apple Inc | Scottish Mortgage vs. Apple Inc | Scottish Mortgage vs. Apple Inc | Scottish Mortgage vs. Apple Inc |
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 Stocks Directory module to find actively traded stocks across global markets.
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