Correlation Between Microsoft and Skardin Industrial

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

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

Diversification Opportunities for Microsoft and Skardin Industrial

-0.12

Correlation Coefficient

Microsoft  Skardin Industrial

Good diversification

The 3 months correlation between Microsoft and Skardin is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Skardin Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skardin Industrial 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 Skardin Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skardin Industrial has no effect on the direction of Microsoft i.e., Microsoft and Skardin Industrial go up and down completely randomly.

Pair Corralation between Microsoft and Skardin Industrial

Given the investment horizon of 90 days Microsoft is expected to generate 1.08 times less return on investment than Skardin Industrial. But when comparing it to its historical volatility, Microsoft is 3.01 times less risky than Skardin Industrial. It trades about 0.05 of its potential returns per unit of risk. Skardin Industrial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,310  in Skardin Industrial on September 16, 2024 and sell it today you would earn a total of  10.00  from holding Skardin Industrial or generate 0.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Skardin Industrial

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Skardin Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skardin Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Skardin Industrial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Microsoft and Skardin Industrial

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

The idea behind Microsoft and Skardin Industrial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..