Correlation Between Microsoft and Simply Good
Can any of the company-specific risk be diversified away by investing in both Microsoft and Simply Good 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 Simply Good into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Simply Good Foods, you can compare the effects of market volatilities on Microsoft and Simply Good 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 Simply Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Simply Good.
Diversification Opportunities for Microsoft and Simply Good
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Simply is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Simply Good Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simply Good Foods 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 Simply Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simply Good Foods has no effect on the direction of Microsoft i.e., Microsoft and Simply Good go up and down completely randomly.
Pair Corralation between Microsoft and Simply Good
Given the investment horizon of 90 days Microsoft is expected to under-perform the Simply Good. In addition to that, Microsoft is 1.12 times more volatile than Simply Good Foods. It trades about -0.06 of its total potential returns per unit of risk. Simply Good Foods is currently generating about 0.59 per unit of volatility. If you would invest 3,225 in Simply Good Foods on August 24, 2024 and sell it today you would earn a total of 696.00 from holding Simply Good Foods or generate 21.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Simply Good Foods
Performance |
| Timeline |
| Microsoft |
| Simply Good Foods |
Microsoft and Simply Good Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Simply Good
The main advantage of trading using opposite Microsoft and Simply Good positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Simply Good 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 Simply Good will offset losses from the drop in Simply Good's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Simply Good vs. Post Holdings | Simply Good vs. Treehouse Foods | Simply Good vs. J J Snack | Simply Good vs. Central Garden Pet |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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