Correlation Between Microsoft and Skandinaviska Enskilda

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

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

Diversification Opportunities for Microsoft and Skandinaviska Enskilda

0.18

Correlation Coefficient

Microsoft  Skandinaviska Enskilda

Average diversification

The 3 months correlation between Microsoft and Skandinaviska is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Skandinaviska Enskilda Banken in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skandinaviska Enskilda 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 Skandinaviska Enskilda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skandinaviska Enskilda has no effect on the direction of Microsoft i.e., Microsoft and Skandinaviska Enskilda go up and down completely randomly.

Pair Corralation between Microsoft and Skandinaviska Enskilda

Given the investment horizon of 90 days Microsoft is expected to under-perform the Skandinaviska Enskilda. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.2 times less risky than Skandinaviska Enskilda. The stock trades about -0.18 of its potential returns per unit of risk. The Skandinaviska Enskilda Banken is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,344  in Skandinaviska Enskilda Banken on October 10, 2024 and sell it today you would earn a total of  46.00  from holding Skandinaviska Enskilda Banken or generate 3.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Microsoft  vs.  Skandinaviska Enskilda Banken

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Skandinaviska Enskilda

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Skandinaviska Enskilda Banken are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Skandinaviska Enskilda may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Microsoft and Skandinaviska Enskilda

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

The idea behind Microsoft and Skandinaviska Enskilda Banken 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 Anywhere module to track or share privately all of your investments from the convenience of any device.