Correlation Between Microsoft and Sungmoon Electronics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Sungmoon Electronics 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 Sungmoon Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Sungmoon Electronics Co, you can compare the effects of market volatilities on Microsoft and Sungmoon Electronics 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 Sungmoon Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Sungmoon Electronics.
Diversification Opportunities for Microsoft and Sungmoon Electronics
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Sungmoon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sungmoon Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungmoon Electronics 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 Sungmoon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungmoon Electronics has no effect on the direction of Microsoft i.e., Microsoft and Sungmoon Electronics go up and down completely randomly.
Pair Corralation between Microsoft and Sungmoon Electronics
Given the investment horizon of 90 days Microsoft is expected to generate 3.12 times less return on investment than Sungmoon Electronics. But when comparing it to its historical volatility, Microsoft is 3.33 times less risky than Sungmoon Electronics. It trades about 0.02 of its potential returns per unit of risk. Sungmoon Electronics Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 490,500 in Sungmoon Electronics Co on October 24, 2024 and sell it today you would lose (2,500) from holding Sungmoon Electronics Co or give up 0.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.72% |
| Values | Daily Returns |
Microsoft vs. Sungmoon Electronics Co
Performance |
| Timeline |
| Microsoft |
| Sungmoon Electronics |
Microsoft and Sungmoon Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Sungmoon Electronics
The main advantage of trading using opposite Microsoft and Sungmoon Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Sungmoon Electronics 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 Sungmoon Electronics will offset losses from the drop in Sungmoon Electronics' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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