Correlation Between Microsoft and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Microsoft and Scandinavian Tobacco 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 Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Microsoft and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Scandinavian Tobacco.
Diversification Opportunities for Microsoft and Scandinavian Tobacco
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Scandinavian is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Microsoft i.e., Microsoft and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Microsoft and Scandinavian Tobacco
Given the investment horizon of 90 days Microsoft is expected to generate 1.46 times more return on investment than Scandinavian Tobacco. However, Microsoft is 1.46 times more volatile than Scandinavian Tobacco Group. It trades about -0.04 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.28 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Microsoft |
| Scandinavian Tobacco |
Microsoft and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Scandinavian Tobacco
The main advantage of trading using opposite Microsoft and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Philip Morris International |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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