Correlation Between Microsoft and SPROUTS FARMERS
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPROUTS FARMERS 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 SPROUTS FARMERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPROUTS FARMERS MKT, you can compare the effects of market volatilities on Microsoft and SPROUTS FARMERS 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 SPROUTS FARMERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPROUTS FARMERS.
Diversification Opportunities for Microsoft and SPROUTS FARMERS
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and SPROUTS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPROUTS FARMERS MKT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPROUTS FARMERS MKT 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 SPROUTS FARMERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPROUTS FARMERS MKT has no effect on the direction of Microsoft i.e., Microsoft and SPROUTS FARMERS go up and down completely randomly.
Pair Corralation between Microsoft and SPROUTS FARMERS
Assuming the 90 days trading horizon Microsoft is expected to under-perform the SPROUTS FARMERS. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.21 times less risky than SPROUTS FARMERS. The stock trades about -0.34 of its potential returns per unit of risk. The SPROUTS FARMERS MKT is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 13,650 in SPROUTS FARMERS MKT on October 16, 2024 and sell it today you would lose (50.00) from holding SPROUTS FARMERS MKT or give up 0.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SPROUTS FARMERS MKT
Performance |
| Timeline |
| Microsoft |
| SPROUTS FARMERS MKT |
Microsoft and SPROUTS FARMERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPROUTS FARMERS
The main advantage of trading using opposite Microsoft and SPROUTS FARMERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPROUTS FARMERS 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 SPROUTS FARMERS will offset losses from the drop in SPROUTS FARMERS's long position.| Microsoft vs. STMicroelectronics NV | Microsoft vs. GMO Internet | Microsoft vs. Nucletron Electronic Aktiengesellschaft | Microsoft vs. COMPUTERSHARE |
| SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS vs. Apple Inc | SPROUTS FARMERS 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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