Correlation Between Microsoft and Supercom
Can any of the company-specific risk be diversified away by investing in both Microsoft and Supercom 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 Supercom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Supercom, you can compare the effects of market volatilities on Microsoft and Supercom 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 Supercom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Supercom.
Diversification Opportunities for Microsoft and Supercom
Weak diversification
The 3 months correlation between Microsoft and Supercom is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Supercom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supercom 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 Supercom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supercom has no effect on the direction of Microsoft i.e., Microsoft and Supercom go up and down completely randomly.
Pair Corralation between Microsoft and Supercom
Given the investment horizon of 90 days Microsoft is expected to under-perform the Supercom. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.54 times less risky than Supercom. The stock trades about -0.04 of its potential returns per unit of risk. The Supercom is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 340.00 in Supercom on August 27, 2024 and sell it today you would earn a total of 28.00 from holding Supercom or generate 8.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Supercom
Performance |
| Timeline |
| Microsoft |
| Supercom |
Microsoft and Supercom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Supercom
The main advantage of trading using opposite Microsoft and Supercom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Supercom 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 Supercom will offset losses from the drop in Supercom's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Supercom vs. Zedcor Inc | Supercom vs. SSC Security Services | Supercom vs. Blue Line Protection | Supercom vs. Guardforce AI Co |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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