Correlation Between Microsoft and Sotherly Hotels
Can any of the company-specific risk be diversified away by investing in both Microsoft and Sotherly Hotels 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 Sotherly Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Sotherly Hotels PR, you can compare the effects of market volatilities on Microsoft and Sotherly Hotels 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 Sotherly Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Sotherly Hotels.
Diversification Opportunities for Microsoft and Sotherly Hotels
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Sotherly is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sotherly Hotels PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels PR 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 Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels PR has no effect on the direction of Microsoft i.e., Microsoft and Sotherly Hotels go up and down completely randomly.
Pair Corralation between Microsoft and Sotherly Hotels
Given the investment horizon of 90 days Microsoft is expected to generate 1.08 times more return on investment than Sotherly Hotels. However, Microsoft is 1.08 times more volatile than Sotherly Hotels PR. It trades about 0.06 of its potential returns per unit of risk. Sotherly Hotels PR is currently generating about -0.03 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Sotherly Hotels PR
Performance |
| Timeline |
| Microsoft |
| Sotherly Hotels PR |
Microsoft and Sotherly Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Sotherly Hotels
The main advantage of trading using opposite Microsoft and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Sotherly Hotels 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 Sotherly Hotels will offset losses from the drop in Sotherly Hotels' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Sotherly Hotels vs. Sotherly Hotels | Sotherly Hotels vs. Service Properties Trust | Sotherly Hotels vs. Braemar Hotel Resorts | Sotherly Hotels vs. Summit Hotel Properties |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |