Correlation Between Microsoft and SGI Enhanced
Can any of the company-specific risk be diversified away by investing in both Microsoft and SGI Enhanced 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 SGI Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SGI Enhanced Core, you can compare the effects of market volatilities on Microsoft and SGI Enhanced 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 SGI Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SGI Enhanced.
Diversification Opportunities for Microsoft and SGI Enhanced
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and SGI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SGI Enhanced Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGI Enhanced Core 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 SGI Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGI Enhanced Core has no effect on the direction of Microsoft i.e., Microsoft and SGI Enhanced go up and down completely randomly.
Pair Corralation between Microsoft and SGI Enhanced
Given the investment horizon of 90 days Microsoft is expected to generate 11.11 times more return on investment than SGI Enhanced. However, Microsoft is 11.11 times more volatile than SGI Enhanced Core. It trades about 0.51 of its potential returns per unit of risk. SGI Enhanced Core is currently generating about 0.35 per unit of risk. If you would invest 41,493 in Microsoft on September 18, 2024 and sell it today you would earn a total of 3,953 from holding Microsoft or generate 9.53% 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. SGI Enhanced Core
Performance |
| Timeline |
| Microsoft |
| SGI Enhanced Core |
Microsoft and SGI Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SGI Enhanced
The main advantage of trading using opposite Microsoft and SGI Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SGI Enhanced 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 SGI Enhanced will offset losses from the drop in SGI Enhanced's long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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