Correlation Between Microsoft and SPO Global
Can any of the company-specific risk be diversified away by investing in both Microsoft and SPO Global 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 SPO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPO Global, you can compare the effects of market volatilities on Microsoft and SPO Global 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 SPO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPO Global.
Diversification Opportunities for Microsoft and SPO Global
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and SPO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPO Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPO Global 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 SPO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPO Global has no effect on the direction of Microsoft i.e., Microsoft and SPO Global go up and down completely randomly.
Pair Corralation between Microsoft and SPO Global
Given the investment horizon of 90 days Microsoft is expected to generate 0.15 times more return on investment than SPO Global. However, Microsoft is 6.82 times less risky than SPO Global. It trades about 0.05 of its potential returns per unit of risk. SPO Global is currently generating about -0.01 per unit of risk. If you would invest 40,862 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,484 from holding Microsoft or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Microsoft vs. SPO Global
Performance |
| Timeline |
| Microsoft |
| SPO Global |
Microsoft and SPO Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPO Global
The main advantage of trading using opposite Microsoft and SPO Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SPO Global 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 SPO Global will offset losses from the drop in SPO Global's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| SPO Global vs. Waldencast Acquisition Corp | SPO Global vs. Alkami Technology | SPO Global vs. ADEIA P | SPO Global vs. Paycor HCM |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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