Correlation Between Microsoft and Satrix Indi

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

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

Diversification Opportunities for Microsoft and Satrix Indi

0.21

Correlation Coefficient

Microsoft  Satrix Indi

Modest diversification

The 3 months correlation between Microsoft and Satrix is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Satrix Indi ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satrix Indi ETF 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 Satrix Indi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satrix Indi ETF has no effect on the direction of Microsoft i.e., Microsoft and Satrix Indi go up and down completely randomly.

Pair Corralation between Microsoft and Satrix Indi

Given the investment horizon of 90 days Microsoft is expected to generate 1.09 times less return on investment than Satrix Indi. In addition to that, Microsoft is 1.35 times more volatile than Satrix Indi ETF. It trades about 0.06 of its total potential returns per unit of risk. Satrix Indi ETF is currently generating about 0.09 per unit of volatility. If you would invest  985,282  in Satrix Indi ETF on September 15, 2024 and sell it today you would earn a total of  223,318  from holding Satrix Indi ETF or generate 22.67% return on investment over 90 days.

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

Microsoft  vs.  Satrix Indi ETF

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Satrix Indi ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix Indi ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Satrix Indi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Satrix Indi

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

The idea behind Microsoft and Satrix Indi ETF 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.