Correlation Between Microsoft and Sino AG

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

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

Diversification Opportunities for Microsoft and Sino AG

0.64

Correlation Coefficient

Microsoft  Sino AG

Poor diversification

The 3 months correlation between Microsoft and Sino is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sino AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino AG 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 Sino AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino AG has no effect on the direction of Microsoft i.e., Microsoft and Sino AG go up and down completely randomly.

Pair Corralation between Microsoft and Sino AG

Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than Sino AG. However, Microsoft is 1.44 times less risky than Sino AG. It trades about 0.11 of its potential returns per unit of risk. Sino AG is currently generating about -0.08 per unit of risk. If you would invest  42,799  in Microsoft on September 27, 2024 and sell it today you would earn a total of  1,134  from holding Microsoft or generate 2.65% return on investment over 90 days.

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

Microsoft  vs.  Sino AG

Microsoft

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Sino AG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sino AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sino AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Sino AG

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

The idea behind Microsoft and Sino AG 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .