Correlation Between Microsoft and Siam City
Can any of the company-specific risk be diversified away by investing in both Microsoft and Siam City 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 Siam City into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Siam City Cement, you can compare the effects of market volatilities on Microsoft and Siam City 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 Siam City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Siam City.
Diversification Opportunities for Microsoft and Siam City
Average diversification
The 3 months correlation between Microsoft and Siam is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Siam City Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam City Cement 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 Siam City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam City Cement has no effect on the direction of Microsoft i.e., Microsoft and Siam City go up and down completely randomly.
Pair Corralation between Microsoft and Siam City
Given the investment horizon of 90 days Microsoft is expected to generate 2.1 times less return on investment than Siam City. But when comparing it to its historical volatility, Microsoft is 1.86 times less risky than Siam City. It trades about 0.19 of its potential returns per unit of risk. Siam City Cement is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 14,650 in Siam City Cement on September 1, 2024 and sell it today you would earn a total of 1,500 from holding Siam City Cement or generate 10.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Microsoft vs. Siam City Cement
Performance |
| Timeline |
| Microsoft |
| Siam City Cement |
Microsoft and Siam City Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Siam City
The main advantage of trading using opposite Microsoft and Siam City positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Siam City 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 Siam City will offset losses from the drop in Siam City's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Siam City vs. Wave Entertainment Public | Siam City vs. Vibhavadi Medical Center | Siam City vs. TPI Polene Public | Siam City vs. Asia Green Energy |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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