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

0.14

Correlation Coefficient

Microsoft  Stockland Corp

Average diversification

The 3 months correlation between Microsoft and Stockland is 0.14. 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 under-perform the Stockland Corp. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.03 times less risky than Stockland Corp. The stock trades about -0.11 of its potential returns per unit of risk. The Stockland Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  272.00  in Stockland Corp on December 25, 2024 and sell it today you would earn a total of  14.00  from holding Stockland Corp or generate 5.15% return on investment over 90 days.

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

Microsoft  vs.  Stockland Corp

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.

Stockland Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stockland Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Stockland Corp is not utilizing all of its potentials. The newest 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.