Correlation Between Microsoft and Stag Industrial

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

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

Diversification Opportunities for Microsoft and Stag Industrial

-0.36

Correlation Coefficient

Microsoft  Stag Industrial

Very good diversification

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

Pair Corralation between Microsoft and Stag Industrial

Given the investment horizon of 90 days Microsoft is expected to under-perform the Stag Industrial. In addition to that, Microsoft is 1.7 times more volatile than Stag Industrial. It trades about -0.1 of its total potential returns per unit of risk. Stag Industrial is currently generating about 0.02 per unit of volatility. If you would invest  3,210  in Stag Industrial on December 22, 2024 and sell it today you would earn a total of  31.00  from holding Stag Industrial or generate 0.97% return on investment over 90 days.

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

Microsoft  vs.  Stag Industrial

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.

Stag Industrial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stag Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Stag Industrial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Stag Industrial

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

The idea behind Microsoft and Stag Industrial 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 Stocks Directory module to find actively traded stocks across global markets.