Correlation Between Microsoft and Saksoft

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

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

Diversification Opportunities for Microsoft and Saksoft

0.11

Correlation Coefficient

Microsoft  Saksoft

Average diversification

The 3 months correlation between Microsoft and Saksoft is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Saksoft Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saksoft Limited 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 Saksoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saksoft Limited has no effect on the direction of Microsoft i.e., Microsoft and Saksoft go up and down completely randomly.

Pair Corralation between Microsoft and Saksoft

Given the investment horizon of 90 days Microsoft is expected to generate 0.53 times more return on investment than Saksoft. However, Microsoft is 1.9 times less risky than Saksoft. It trades about 0.02 of its potential returns per unit of risk. Saksoft Limited is currently generating about -0.12 per unit of risk. If you would invest  43,125  in Microsoft on September 25, 2024 and sell it today you would earn a total of  400.00  from holding Microsoft or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  Saksoft Limited

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Saksoft Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saksoft Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Saksoft

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

The idea behind Microsoft and Saksoft Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..