Correlation Between Microsoft and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Microsoft and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Sumitomo Chemical Co, you can compare the effects of market volatilities on Microsoft and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Sumitomo Chemical.
Diversification Opportunities for Microsoft and Sumitomo Chemical
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Sumitomo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Microsoft i.e., Microsoft and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Microsoft and Sumitomo Chemical
Given the investment horizon of 90 days Microsoft is expected to generate 0.66 times more return on investment than Sumitomo Chemical. However, Microsoft is 1.51 times less risky than Sumitomo Chemical. It trades about 0.06 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about -0.02 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Microsoft |
| Sumitomo Chemical |
Microsoft and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Sumitomo Chemical
The main advantage of trading using opposite Microsoft and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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