Correlation Between Microsoft and SINGAPORE AIRLINES

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

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

Diversification Opportunities for Microsoft and SINGAPORE AIRLINES

0.2

Correlation Coefficient

Microsoft  SINGAPORE AIRLINES

Modest diversification

The 3 months correlation between Microsoft and SINGAPORE is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SINGAPORE AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SINGAPORE AIRLINES 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 SINGAPORE AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SINGAPORE AIRLINES has no effect on the direction of Microsoft i.e., Microsoft and SINGAPORE AIRLINES go up and down completely randomly.

Pair Corralation between Microsoft and SINGAPORE AIRLINES

Assuming the 90 days trading horizon Microsoft is expected to generate 1.1 times more return on investment than SINGAPORE AIRLINES. However, Microsoft is 1.1 times more volatile than SINGAPORE AIRLINES. It trades about 0.09 of its potential returns per unit of risk. SINGAPORE AIRLINES is currently generating about 0.05 per unit of risk. If you would invest  23,469  in Microsoft on September 27, 2024 and sell it today you would earn a total of  18,361  from holding Microsoft or generate 78.24% 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.  SINGAPORE AIRLINES

Microsoft

Risk-Adjusted Performance

8 of 100

OK

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 January 2025.

SINGAPORE AIRLINES

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SINGAPORE AIRLINES are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SINGAPORE AIRLINES 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 SINGAPORE AIRLINES

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

The idea behind Microsoft and SINGAPORE AIRLINES 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.