Correlation Between Selective Insurance and Microsoft
Can any of the company-specific risk be diversified away by investing in both Selective Insurance and Microsoft 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 Selective Insurance and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Selective Insurance Group and Microsoft, you can compare the effects of market volatilities on Selective Insurance and Microsoft 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 Selective Insurance with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and Microsoft.
Diversification Opportunities for Selective Insurance and Microsoft
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Selective and Microsoft is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Selective Insurance 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 Selective Insurance Group are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Selective Insurance i.e., Selective Insurance and Microsoft go up and down completely randomly.
Pair Corralation between Selective Insurance and Microsoft
Assuming the 90 days horizon Selective Insurance Group is expected to under-perform the Microsoft. In addition to that, Selective Insurance is 1.07 times more volatile than Microsoft. It trades about -0.22 of its total potential returns per unit of risk. Microsoft is currently generating about 0.28 per unit of volatility. If you would invest 39,626 in Microsoft on September 13, 2024 and sell it today you would earn a total of 3,114 from holding Microsoft or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selective Insurance Group vs. Microsoft
Performance |
| Timeline |
| Selective Insurance |
| Microsoft |
Selective Insurance and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selective Insurance and Microsoft
The main advantage of trading using opposite Selective Insurance and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Selective Insurance vs. QBE Insurance Group | Selective Insurance vs. Insurance Australia Group | Selective Insurance vs. Superior Plus Corp | Selective Insurance vs. SIVERS SEMICONDUCTORS AB |
| Microsoft vs. AM EAGLE OUTFITTERS | Microsoft vs. Austevoll Seafood ASA | Microsoft vs. CN MODERN DAIRY | Microsoft vs. ASSOC BR FOODS |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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