Correlation Between Microsoft and SGHC
Can any of the company-specific risk be diversified away by investing in both Microsoft and SGHC 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 SGHC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SGHC Limited, you can compare the effects of market volatilities on Microsoft and SGHC 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 SGHC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SGHC.
Diversification Opportunities for Microsoft and SGHC
Significant diversification
The 3 months correlation between Microsoft and SGHC is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SGHC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGHC Limited 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 SGHC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGHC Limited has no effect on the direction of Microsoft i.e., Microsoft and SGHC go up and down completely randomly.
Pair Corralation between Microsoft and SGHC
Given the investment horizon of 90 days Microsoft is expected to under-perform the SGHC. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.82 times less risky than SGHC. The stock trades about -0.04 of its potential returns per unit of risk. The SGHC Limited is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 418.00 in SGHC Limited on August 30, 2024 and sell it today you would earn a total of 255.00 from holding SGHC Limited or generate 61.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SGHC Limited
Performance |
| Timeline |
| Microsoft |
| SGHC Limited |
Microsoft and SGHC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SGHC
The main advantage of trading using opposite Microsoft and SGHC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SGHC 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 SGHC will offset losses from the drop in SGHC's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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