Correlation Between Microsoft and SPARTAN STORES
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPARTAN STORES 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 SPARTAN STORES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPARTAN STORES, you can compare the effects of market volatilities on Microsoft and SPARTAN STORES 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 SPARTAN STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPARTAN STORES.
Diversification Opportunities for Microsoft and SPARTAN STORES
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and SPARTAN is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of Microsoft i.e., Microsoft and SPARTAN STORES go up and down completely randomly.
Pair Corralation between Microsoft and SPARTAN STORES
Assuming the 90 days trading horizon Microsoft is expected to generate 0.53 times more return on investment than SPARTAN STORES. However, Microsoft is 1.89 times less risky than SPARTAN STORES. It trades about 0.0 of its potential returns per unit of risk. SPARTAN STORES is currently generating about -0.1 per unit of risk. If you would invest 39,955 in Microsoft on August 31, 2024 and sell it today you would lose (70.00) from holding Microsoft or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. SPARTAN STORES
Performance |
| Timeline |
| Microsoft |
| SPARTAN STORES |
Microsoft and SPARTAN STORES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPARTAN STORES
The main advantage of trading using opposite Microsoft and SPARTAN STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPARTAN STORES 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 SPARTAN STORES will offset losses from the drop in SPARTAN STORES's long position.| Microsoft vs. PLAYTIKA HOLDING DL 01 | Microsoft vs. Apollo Investment Corp | Microsoft vs. MGIC INVESTMENT | Microsoft vs. LG Display Co |
| SPARTAN STORES vs. SIVERS SEMICONDUCTORS AB | SPARTAN STORES vs. Darden Restaurants | SPARTAN STORES vs. Reliance Steel Aluminum | SPARTAN STORES vs. Q2M Managementberatung AG |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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