Correlation Between Microsoft and SOUTHERN PER

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

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

Diversification Opportunities for Microsoft and SOUTHERN PER

0.48

Correlation Coefficient

Microsoft  SOUTHERN PER

Very weak diversification

The 3 months correlation between Microsoft and SOUTHERN is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SOUTHERN PER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER 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 SOUTHERN PER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER has no effect on the direction of Microsoft i.e., Microsoft and SOUTHERN PER go up and down completely randomly.

Pair Corralation between Microsoft and SOUTHERN PER

Assuming the 90 days trading horizon Microsoft is expected to under-perform the SOUTHERN PER. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.16 times less risky than SOUTHERN PER. The stock trades about -0.11 of its potential returns per unit of risk. The SOUTHERN PER is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,904  in SOUTHERN PER on December 25, 2024 and sell it today you would earn a total of  396.00  from holding SOUTHERN PER or generate 4.45% return on investment over 90 days.

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

Microsoft  vs.  SOUTHERN PER

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 unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

SOUTHERN PER

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SOUTHERN PER are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SOUTHERN PER 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 SOUTHERN PER

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

The idea behind Microsoft and SOUTHERN PER 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.