Correlation Between Microsoft and Singapore Telecommunicatio

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

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

Diversification Opportunities for Microsoft and Singapore Telecommunicatio

-0.47

Correlation Coefficient

Microsoft  Singapore Telecommunicatio

Very good diversification

The 3 months correlation between Microsoft and Singapore is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Singapore Telecommunications P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Telecommunicatio 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 Singapore Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Telecommunicatio has no effect on the direction of Microsoft i.e., Microsoft and Singapore Telecommunicatio go up and down completely randomly.

Pair Corralation between Microsoft and Singapore Telecommunicatio

Given the investment horizon of 90 days Microsoft is expected to generate 1.21 times more return on investment than Singapore Telecommunicatio. However, Microsoft is 1.21 times more volatile than Singapore Telecommunications PK. It trades about 0.07 of its potential returns per unit of risk. Singapore Telecommunications PK is currently generating about -0.06 per unit of risk. If you would invest  42,346  in Microsoft on September 30, 2024 and sell it today you would earn a total of  707.00  from holding Microsoft or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Singapore Telecommunications P

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Singapore Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Telecommunications PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microsoft and Singapore Telecommunicatio

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

The idea behind Microsoft and Singapore Telecommunications PK 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.