Correlation Between Microsoft and Safran SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Safran SA 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 Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Safran SA, you can compare the effects of market volatilities on Microsoft and Safran SA 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 Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Safran SA.
Diversification Opportunities for Microsoft and Safran SA
Weak diversification
The 3 months correlation between Microsoft and Safran is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Microsoft i.e., Microsoft and Safran SA go up and down completely randomly.
Pair Corralation between Microsoft and Safran SA
Given the investment horizon of 90 days Microsoft is expected to generate 3.31 times less return on investment than Safran SA. In addition to that, Microsoft is 1.19 times more volatile than Safran SA. It trades about 0.02 of its total potential returns per unit of risk. Safran SA is currently generating about 0.09 per unit of volatility. If you would invest 21,160 in Safran SA on August 29, 2024 and sell it today you would earn a total of 560.00 from holding Safran SA or generate 2.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Safran SA
Performance |
| Timeline |
| Microsoft |
| Safran SA |
Microsoft and Safran SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Safran SA
The main advantage of trading using opposite Microsoft and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Safran SA 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 Safran SA will offset losses from the drop in Safran SA's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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