Correlation Between Microsoft and Safestore Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Safestore Holdings 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 Safestore Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Safestore Holdings plc, you can compare the effects of market volatilities on Microsoft and Safestore Holdings 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 Safestore Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Safestore Holdings.
Diversification Opportunities for Microsoft and Safestore Holdings
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Safestore is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Safestore Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safestore Holdings 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 Safestore Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safestore Holdings plc has no effect on the direction of Microsoft i.e., Microsoft and Safestore Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Safestore Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than Safestore Holdings. However, Microsoft is 1.35 times less risky than Safestore Holdings. It trades about 0.02 of its potential returns per unit of risk. Safestore Holdings plc is currently generating about -0.02 per unit of risk. If you would invest 41,123 in Microsoft on September 3, 2024 and sell it today you would earn a total of 1,223 from holding Microsoft or generate 2.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Safestore Holdings plc
Performance |
| Timeline |
| Microsoft |
| Safestore Holdings plc |
Microsoft and Safestore Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Safestore Holdings
The main advantage of trading using opposite Microsoft and Safestore Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Safestore Holdings 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 Safestore Holdings will offset losses from the drop in Safestore Holdings' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Safestore Holdings vs. Apple Inc | Safestore Holdings vs. Microsoft | Safestore Holdings vs. Amazon Inc | Safestore Holdings vs. Alphabet Inc Class C |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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