Correlation Between Microsoft and Stingray

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

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

Diversification Opportunities for Microsoft and Stingray

-0.51

Correlation Coefficient

Microsoft  Stingray

Excellent diversification

The 3 months correlation between Microsoft and Stingray is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Stingray Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stingray Group 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 Stingray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stingray Group has no effect on the direction of Microsoft i.e., Microsoft and Stingray go up and down completely randomly.

Pair Corralation between Microsoft and Stingray

Given the investment horizon of 90 days Microsoft is expected to under-perform the Stingray. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.66 times less risky than Stingray. The stock trades about -0.06 of its potential returns per unit of risk. The Stingray Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  561.00  in Stingray Group on November 28, 2024 and sell it today you would earn a total of  73.00  from holding Stingray Group or generate 13.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Microsoft  vs.  Stingray Group

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 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.

Stingray Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stingray Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Stingray reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Stingray

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

The idea behind Microsoft and Stingray Group 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.