Correlation Between Microsoft and Stockland Corp

Can any of the company-specific risk be diversified away by investing in both Microsoft and Stockland Corp 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 Stockland Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Stockland Corp, you can compare the effects of market volatilities on Microsoft and Stockland Corp 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 Stockland Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Stockland Corp.

Diversification Opportunities for Microsoft and Stockland Corp

-0.51

Correlation Coefficient

Microsoft  Stockland Corp

Excellent diversification

The 3 months correlation between Microsoft and Stockland is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Stockland Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stockland Corp 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 Stockland Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stockland Corp has no effect on the direction of Microsoft i.e., Microsoft and Stockland Corp go up and down completely randomly.

Pair Corralation between Microsoft and Stockland Corp

Assuming the 90 days trading horizon Microsoft is expected to generate 0.9 times more return on investment than Stockland Corp. However, Microsoft is 1.12 times less risky than Stockland Corp. It trades about 0.11 of its potential returns per unit of risk. Stockland Corp is currently generating about -0.01 per unit of risk. If you would invest  39,132  in Microsoft on October 24, 2024 and sell it today you would earn a total of  3,638  from holding Microsoft or generate 9.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Microsoft  vs.  Stockland Corp

Microsoft

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stockland Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stockland Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stockland Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Stockland Corp

The main advantage of trading using opposite Microsoft and Stockland Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Stockland Corp 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 Stockland Corp will offset losses from the drop in Stockland Corp's long position.

The idea behind Microsoft and Stockland Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.