Correlation Between Microsoft and SAF Holland
Can any of the company-specific risk be diversified away by investing in both Microsoft and SAF Holland 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 SAF Holland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SAF Holland SA, you can compare the effects of market volatilities on Microsoft and SAF Holland 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 SAF Holland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SAF Holland.
Diversification Opportunities for Microsoft and SAF Holland
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and SAF is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SAF Holland SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAF Holland SA 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 SAF Holland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAF Holland SA has no effect on the direction of Microsoft i.e., Microsoft and SAF Holland go up and down completely randomly.
Pair Corralation between Microsoft and SAF Holland
Assuming the 90 days trading horizon Microsoft is expected to generate 0.7 times more return on investment than SAF Holland. However, Microsoft is 1.42 times less risky than SAF Holland. It trades about 0.09 of its potential returns per unit of risk. SAF Holland SA is currently generating about 0.06 per unit of risk. If you would invest 22,997 in Microsoft on September 5, 2024 and sell it today you would earn a total of 17,793 from holding Microsoft or generate 77.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SAF Holland SA
Performance |
| Timeline |
| Microsoft |
| SAF Holland SA |
Microsoft and SAF Holland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SAF Holland
The main advantage of trading using opposite Microsoft and SAF Holland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SAF Holland 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 SAF Holland will offset losses from the drop in SAF Holland's long position.| Microsoft vs. Selective Insurance Group | Microsoft vs. SBI Insurance Group | Microsoft vs. Chesapeake Utilities | Microsoft vs. Magnachip Semiconductor |
| SAF Holland vs. Science Applications International | SAF Holland vs. INFORMATION SVC GRP | SAF Holland vs. DATANG INTL POW | SAF Holland vs. THORNEY TECHS LTD |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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