Correlation Between Microsoft and Sky Century

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

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

Diversification Opportunities for Microsoft and Sky Century

0.14

Correlation Coefficient

Microsoft  Sky Century

Average diversification

The 3 months correlation between Microsoft and Sky is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sky Century Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Century Investment 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 Sky Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Century Investment has no effect on the direction of Microsoft i.e., Microsoft and Sky Century go up and down completely randomly.

Pair Corralation between Microsoft and Sky Century

Given the investment horizon of 90 days Microsoft is expected to generate 30.18 times less return on investment than Sky Century. But when comparing it to its historical volatility, Microsoft is 17.05 times less risky than Sky Century. It trades about 0.05 of its potential returns per unit of risk. Sky Century Investment is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Sky Century Investment on December 28, 2024 and sell it today you would lose (0.13) from holding Sky Century Investment or give up 37.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Microsoft  vs.  Sky Century Investment

Microsoft

Risk-Adjusted Performance

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Sky Century Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Century Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Sky Century demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Sky Century

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

The idea behind Microsoft and Sky Century Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.