Correlation Between Microsoft and SECURITAS

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

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

Diversification Opportunities for Microsoft and SECURITAS

-0.68

Correlation Coefficient

Microsoft  SECURITAS

Excellent diversification

The 3 months correlation between Microsoft and SECURITAS is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SECURITAS B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECURITAS B 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 SECURITAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECURITAS B has no effect on the direction of Microsoft i.e., Microsoft and SECURITAS go up and down completely randomly.

Pair Corralation between Microsoft and SECURITAS

Assuming the 90 days trading horizon Microsoft is expected to under-perform the SECURITAS. In addition to that, Microsoft is 1.28 times more volatile than SECURITAS B . It trades about -0.08 of its total potential returns per unit of risk. SECURITAS B is currently generating about 0.23 per unit of volatility. If you would invest  1,182  in SECURITAS B on December 2, 2024 and sell it today you would earn a total of  207.00  from holding SECURITAS B or generate 17.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  SECURITAS B

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SECURITAS B

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and SECURITAS

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

The idea behind Microsoft and SECURITAS B 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.