Correlation Between SINGAPORE AIRLINES and Microsoft

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

By analyzing existing cross correlation between SINGAPORE AIRLINES and Microsoft, you can compare the effects of market volatilities on SINGAPORE AIRLINES and Microsoft 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 SINGAPORE AIRLINES with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of SINGAPORE AIRLINES and Microsoft.

Diversification Opportunities for SINGAPORE AIRLINES and Microsoft

0.51

Correlation Coefficient

SINGAPORE AIRLINES  Microsoft

Very weak diversification

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

Pair Corralation between SINGAPORE AIRLINES and Microsoft

Assuming the 90 days trading horizon SINGAPORE AIRLINES is expected to generate 9.51 times less return on investment than Microsoft. But when comparing it to its historical volatility, SINGAPORE AIRLINES is 1.65 times less risky than Microsoft. It trades about 0.02 of its potential returns per unit of risk. Microsoft is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  39,342  in Microsoft on October 26, 2024 and sell it today you would earn a total of  3,378  from holding Microsoft or generate 8.59% return on investment over 90 days.

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

SINGAPORE AIRLINES  vs.  Microsoft

SINGAPORE AIRLINES

Risk-Adjusted Performance

1 of 100

Weak

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

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SINGAPORE AIRLINES and Microsoft

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

The idea behind SINGAPORE AIRLINES and Microsoft 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.