Correlation Between Microsoft and Steady Safe

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

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

Diversification Opportunities for Microsoft and Steady Safe

0.46

Correlation Coefficient

Microsoft  Steady Safe

Very weak diversification

The 3 months correlation between Microsoft and Steady is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Steady Safe TBK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steady Safe TBK 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 Steady Safe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steady Safe TBK has no effect on the direction of Microsoft i.e., Microsoft and Steady Safe go up and down completely randomly.

Pair Corralation between Microsoft and Steady Safe

Given the investment horizon of 90 days Microsoft is expected to generate 0.23 times more return on investment than Steady Safe. However, Microsoft is 4.43 times less risky than Steady Safe. It trades about 0.05 of its potential returns per unit of risk. Steady Safe TBK is currently generating about 0.0 per unit of risk. If you would invest  40,862  in Microsoft on September 3, 2024 and sell it today you would earn a total of  1,484  from holding Microsoft or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Steady Safe TBK

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Steady Safe TBK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steady Safe TBK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Steady Safe is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and Steady Safe

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

The idea behind Microsoft and Steady Safe TBK 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.