Correlation Between Microsoft and Svenska Handelsbanken
Can any of the company-specific risk be diversified away by investing in both Microsoft and Svenska Handelsbanken 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 Svenska Handelsbanken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Svenska Handelsbanken AB, you can compare the effects of market volatilities on Microsoft and Svenska Handelsbanken 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 Svenska Handelsbanken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Svenska Handelsbanken.
Diversification Opportunities for Microsoft and Svenska Handelsbanken
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Svenska is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken 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 Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of Microsoft i.e., Microsoft and Svenska Handelsbanken go up and down completely randomly.
Pair Corralation between Microsoft and Svenska Handelsbanken
Given the investment horizon of 90 days Microsoft is expected to under-perform the Svenska Handelsbanken. In addition to that, Microsoft is 1.95 times more volatile than Svenska Handelsbanken AB. It trades about -0.04 of its total potential returns per unit of risk. Svenska Handelsbanken AB is currently generating about 0.11 per unit of volatility. If you would invest 11,130 in Svenska Handelsbanken AB on August 31, 2024 and sell it today you would earn a total of 250.00 from holding Svenska Handelsbanken AB or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Svenska Handelsbanken AB
Performance |
| Timeline |
| Microsoft |
| Svenska Handelsbanken |
Microsoft and Svenska Handelsbanken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Svenska Handelsbanken
The main advantage of trading using opposite Microsoft and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Svenska Handelsbanken 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 Svenska Handelsbanken will offset losses from the drop in Svenska Handelsbanken's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Svenska Handelsbanken vs. Swedbank AB | Svenska Handelsbanken vs. Nordea Bank Abp | Svenska Handelsbanken vs. Tele2 AB | Svenska Handelsbanken vs. Telia Company AB |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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