Correlation Between Microsoft and SCANDINAV REAL

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

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

Diversification Opportunities for Microsoft and SCANDINAV REAL

-0.8

Correlation Coefficient

Microsoft  SCANDINAV REAL

Pay attention - limited upside

The 3 months correlation between Microsoft and SCANDINAV is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SCANDINAV REAL HEART in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANDINAV REAL HEART 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 SCANDINAV REAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCANDINAV REAL HEART has no effect on the direction of Microsoft i.e., Microsoft and SCANDINAV REAL go up and down completely randomly.

Pair Corralation between Microsoft and SCANDINAV REAL

Assuming the 90 days trading horizon Microsoft is expected to generate 0.26 times more return on investment than SCANDINAV REAL. However, Microsoft is 3.88 times less risky than SCANDINAV REAL. It trades about 0.11 of its potential returns per unit of risk. SCANDINAV REAL HEART is currently generating about -0.15 per unit of risk. If you would invest  39,192  in Microsoft on September 19, 2024 and sell it today you would earn a total of  3,833  from holding Microsoft or generate 9.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

Microsoft  vs.  SCANDINAV REAL HEART

Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SCANDINAV REAL HEART

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCANDINAV REAL HEART has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and SCANDINAV REAL

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

The idea behind Microsoft and SCANDINAV REAL HEART 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.