Correlation Between Microsoft and SCHMID Group

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

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

Diversification Opportunities for Microsoft and SCHMID Group

0.36

Correlation Coefficient

Microsoft  SCHMID Group

Weak diversification

The 3 months correlation between Microsoft and SCHMID is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SCHMID Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCHMID Group NV 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 SCHMID Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCHMID Group NV has no effect on the direction of Microsoft i.e., Microsoft and SCHMID Group go up and down completely randomly.

Pair Corralation between Microsoft and SCHMID Group

Given the investment horizon of 90 days Microsoft is expected to under-perform the SCHMID Group. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 14.29 times less risky than SCHMID Group. The stock trades about -0.03 of its potential returns per unit of risk. The SCHMID Group NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  44.00  in SCHMID Group NV on September 29, 2024 and sell it today you would lose (17.00) from holding SCHMID Group NV or give up 38.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.27%
Values	Daily Returns

Microsoft  vs.  SCHMID Group NV

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.

SCHMID Group NV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SCHMID Group NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, SCHMID Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and SCHMID Group

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

The idea behind Microsoft and SCHMID Group NV 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.