Correlation Between Microsoft and SC Asset
Can any of the company-specific risk be diversified away by investing in both Microsoft and SC Asset 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 SC Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SC Asset, you can compare the effects of market volatilities on Microsoft and SC Asset 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 SC Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SC Asset.
Diversification Opportunities for Microsoft and SC Asset
Modest diversification
The 3 months correlation between Microsoft and SC Asset is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SC Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SC Asset 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 SC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SC Asset has no effect on the direction of Microsoft i.e., Microsoft and SC Asset go up and down completely randomly.
Pair Corralation between Microsoft and SC Asset
Given the investment horizon of 90 days Microsoft is expected to generate 31.43 times less return on investment than SC Asset. But when comparing it to its historical volatility, Microsoft is 44.77 times less risky than SC Asset. It trades about 0.07 of its potential returns per unit of risk. SC Asset is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 400.00 in SC Asset on August 29, 2024 and sell it today you would lose (106.00) from holding SC Asset or give up 26.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.99% |
| Values | Daily Returns |
Microsoft vs. SC Asset
Performance |
| Timeline |
| Microsoft |
| SC Asset |
Microsoft and SC Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SC Asset
The main advantage of trading using opposite Microsoft and SC Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SC Asset 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 SC Asset will offset losses from the drop in SC Asset's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| SC Asset vs. Eastern Star Real | SC Asset vs. Ananda Development Public | SC Asset vs. Better World Green | SC Asset vs. Dcon Products Public |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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