Correlation Between Microsoft and Sono Tek
Can any of the company-specific risk be diversified away by investing in both Microsoft and Sono Tek 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 Sono Tek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Sono Tek Corp, you can compare the effects of market volatilities on Microsoft and Sono Tek 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 Sono Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Sono Tek.
Diversification Opportunities for Microsoft and Sono Tek
Good diversification
The 3 months correlation between Microsoft and Sono is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp 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 Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of Microsoft i.e., Microsoft and Sono Tek go up and down completely randomly.
Pair Corralation between Microsoft and Sono Tek
Given the investment horizon of 90 days Microsoft is expected to under-perform the Sono Tek. In addition to that, Microsoft is 1.05 times more volatile than Sono Tek Corp. It trades about -0.04 of its total potential returns per unit of risk. Sono Tek Corp is currently generating about 0.27 per unit of volatility. If you would invest 423.00 in Sono Tek Corp on August 31, 2024 and sell it today you would earn a total of 43.00 from holding Sono Tek Corp or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Sono Tek Corp
Performance |
| Timeline |
| Microsoft |
| Sono Tek Corp |
Microsoft and Sono Tek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Sono Tek
The main advantage of trading using opposite Microsoft and Sono Tek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Sono Tek 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 Sono Tek will offset losses from the drop in Sono Tek's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Sono Tek vs. Novanta | Sono Tek vs. ESCO Technologies | Sono Tek vs. Vontier Corp | Sono Tek vs. Sensata Technologies Holding |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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