Correlation Between Microsoft and SS Innovations

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

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

Diversification Opportunities for Microsoft and SS Innovations

0.44

Correlation Coefficient

Microsoft  SS Innovations

Very weak diversification

The 3 months correlation between Microsoft and SSII is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SS Innovations International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SS Innovations Inter 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 SS Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SS Innovations Inter has no effect on the direction of Microsoft i.e., Microsoft and SS Innovations go up and down completely randomly.

Pair Corralation between Microsoft and SS Innovations

Given the investment horizon of 90 days Microsoft is expected to generate 14.44 times less return on investment than SS Innovations. But when comparing it to its historical volatility, Microsoft is 32.43 times less risky than SS Innovations. It trades about 0.1 of its potential returns per unit of risk. SS Innovations International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in SS Innovations International on September 30, 2024 and sell it today you would lose (200.00) from holding SS Innovations International or give up 20.0% of portfolio value over 90 days.

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

Microsoft  vs.  SS Innovations International

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.

SS Innovations Inter

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SS Innovations International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, SS Innovations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and SS Innovations

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

The idea behind Microsoft and SS Innovations International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.