Correlation Between Microsoft and Sun Max

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

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

Diversification Opportunities for Microsoft and Sun Max

-0.65

Correlation Coefficient

Microsoft  Sun Max

Excellent diversification

The 3 months correlation between Microsoft and Sun is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sun Max Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Max Tech 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 Sun Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Max Tech has no effect on the direction of Microsoft i.e., Microsoft and Sun Max go up and down completely randomly.

Pair Corralation between Microsoft and Sun Max

Given the investment horizon of 90 days Microsoft is expected to under-perform the Sun Max. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.37 times less risky than Sun Max. The stock trades about -0.08 of its potential returns per unit of risk. The Sun Max Tech is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,300  in Sun Max Tech on December 29, 2024 and sell it today you would lose (160.00) from holding Sun Max Tech or give up 3.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.8%
Values	Daily Returns

Microsoft  vs.  Sun Max Tech

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 abnormal 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.

Sun Max Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Max Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sun Max 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 Sun Max

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

The idea behind Microsoft and Sun Max Tech 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.