Correlation Between Microsoft and Scientific

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

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

Diversification Opportunities for Microsoft and Scientific

0.35

Correlation Coefficient

Microsoft  Scientific

Weak diversification

The 3 months correlation between Microsoft and Scientific is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Scientific Games International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games Int 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 Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games Int has no effect on the direction of Microsoft i.e., Microsoft and Scientific go up and down completely randomly.

Pair Corralation between Microsoft and Scientific

Given the investment horizon of 90 days Microsoft is expected to under-perform the Scientific. In addition to that, Microsoft is 4.37 times more volatile than Scientific Games International. It trades about -0.09 of its total potential returns per unit of risk. Scientific Games International is currently generating about 0.07 per unit of volatility. If you would invest  10,208  in Scientific Games International on December 27, 2024 and sell it today you would earn a total of  142.00  from holding Scientific Games International or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Microsoft  vs.  Scientific Games International

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.

Scientific Games Int

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scientific Games International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Scientific is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Scientific

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

The idea behind Microsoft and Scientific Games 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.