Correlation Between Microsoft and SPACE HELLAS

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

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

Diversification Opportunities for Microsoft and SPACE HELLAS

-0.72

Correlation Coefficient

Microsoft  SPACE HELLAS

Pay attention - limited upside

The 3 months correlation between Microsoft and SPACE is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPACE HELLAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE HELLAS 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 SPACE HELLAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE HELLAS has no effect on the direction of Microsoft i.e., Microsoft and SPACE HELLAS go up and down completely randomly.

Pair Corralation between Microsoft and SPACE HELLAS

Assuming the 90 days trading horizon Microsoft is expected to generate 0.95 times more return on investment than SPACE HELLAS. However, Microsoft is 1.05 times less risky than SPACE HELLAS. It trades about 0.07 of its potential returns per unit of risk. SPACE HELLAS is currently generating about -0.13 per unit of risk. If you would invest  37,532  in Microsoft on September 2, 2024 and sell it today you would earn a total of  2,313  from holding Microsoft or generate 6.16% return on investment over 90 days.

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

Microsoft  vs.  SPACE HELLAS

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPACE HELLAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPACE HELLAS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Microsoft and SPACE HELLAS

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

The idea behind Microsoft and SPACE HELLAS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.