Correlation Between Microsoft and Saga Plc
Can any of the company-specific risk be diversified away by investing in both Microsoft and Saga Plc 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 Saga Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Saga plc, you can compare the effects of market volatilities on Microsoft and Saga Plc 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 Saga Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Saga Plc.
Diversification Opportunities for Microsoft and Saga Plc
Good diversification
The 3 months correlation between Microsoft and Saga is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Saga plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saga plc 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 Saga Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saga plc has no effect on the direction of Microsoft i.e., Microsoft and Saga Plc go up and down completely randomly.
Pair Corralation between Microsoft and Saga Plc
Given the investment horizon of 90 days Microsoft is expected to generate 0.62 times more return on investment than Saga Plc. However, Microsoft is 1.62 times less risky than Saga Plc. It trades about 0.19 of its potential returns per unit of risk. Saga plc is currently generating about 0.04 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Microsoft vs. Saga plc
Performance |
| Timeline |
| Microsoft |
| Saga plc |
Microsoft and Saga Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Saga Plc
The main advantage of trading using opposite Microsoft and Saga Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Saga Plc 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 Saga Plc will offset losses from the drop in Saga Plc's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Saga Plc vs. BE Semiconductor Industries | Saga Plc vs. Morgan Advanced Materials | Saga Plc vs. Compagnie Plastic Omnium | Saga Plc vs. Cars 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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