Correlation Between Microsoft and SW Seed
Can any of the company-specific risk be diversified away by investing in both Microsoft and SW Seed 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 SW Seed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SW Seed Company, you can compare the effects of market volatilities on Microsoft and SW Seed 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 SW Seed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SW Seed.
Diversification Opportunities for Microsoft and SW Seed
Good diversification
The 3 months correlation between Microsoft and SANW is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SW Seed Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SW Seed Company 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 SW Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SW Seed Company has no effect on the direction of Microsoft i.e., Microsoft and SW Seed go up and down completely randomly.
Pair Corralation between Microsoft and SW Seed
Given the investment horizon of 90 days Microsoft is expected to generate 0.19 times more return on investment than SW Seed. However, Microsoft is 5.31 times less risky than SW Seed. It trades about 0.06 of its potential returns per unit of risk. SW Seed Company is currently generating about -0.02 per unit of risk. If you would invest 33,425 in Microsoft on August 28, 2024 and sell it today you would earn a total of 8,454 from holding Microsoft or generate 25.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SW Seed Company
Performance |
| Timeline |
| Microsoft |
| SW Seed Company |
Microsoft and SW Seed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SW Seed
The main advantage of trading using opposite Microsoft and SW Seed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SW Seed 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 SW Seed will offset losses from the drop in SW Seed's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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