Correlation Between Microsoft and SNC Lavalin

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

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

Diversification Opportunities for Microsoft and SNC Lavalin

0.24

Correlation Coefficient

Microsoft  SNC Lavalin

Modest diversification

The 3 months correlation between Microsoft and SNC is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SNC Lavalin Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNC Lavalin Group 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 SNC Lavalin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNC Lavalin Group has no effect on the direction of Microsoft i.e., Microsoft and SNC Lavalin go up and down completely randomly.

Pair Corralation between Microsoft and SNC Lavalin

Given the investment horizon of 90 days Microsoft is expected to generate 22.76 times less return on investment than SNC Lavalin. But when comparing it to its historical volatility, Microsoft is 1.92 times less risky than SNC Lavalin. It trades about 0.02 of its potential returns per unit of risk. SNC Lavalin Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,348  in SNC Lavalin Group on September 21, 2024 and sell it today you would earn a total of  2,081  from holding SNC Lavalin Group or generate 38.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  SNC Lavalin Group

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

SNC Lavalin Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SNC Lavalin Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, SNC Lavalin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and SNC Lavalin

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

The idea behind Microsoft and SNC Lavalin Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.