Correlation Between Microsoft and Salee Colour

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

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

Diversification Opportunities for Microsoft and Salee Colour

-0.19

Correlation Coefficient

Microsoft  Salee Colour

Good diversification

The 3 months correlation between Microsoft and Salee is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Salee Colour Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salee Colour Public 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 Salee Colour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salee Colour Public has no effect on the direction of Microsoft i.e., Microsoft and Salee Colour go up and down completely randomly.

Pair Corralation between Microsoft and Salee Colour

Given the investment horizon of 90 days Microsoft is expected to generate 332.15 times less return on investment than Salee Colour. But when comparing it to its historical volatility, Microsoft is 71.8 times less risky than Salee Colour. It trades about 0.02 of its potential returns per unit of risk. Salee Colour Public is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  124.00  in Salee Colour Public on September 13, 2024 and sell it today you would lose (14.00) from holding Salee Colour Public or give up 11.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.8%
Values	Daily Returns

Microsoft  vs.  Salee Colour Public

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

Salee Colour Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salee Colour Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microsoft and Salee Colour

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

The idea behind Microsoft and Salee Colour Public 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.