Correlation Between Microsoft and Screaming Eagle

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

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

Diversification Opportunities for Microsoft and Screaming Eagle

0.25

Correlation Coefficient

Microsoft  Screaming Eagle

Modest diversification

The 3 months correlation between Microsoft and Screaming is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Screaming Eagle Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Screaming Eagle Acqu 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 Screaming Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Screaming Eagle Acqu has no effect on the direction of Microsoft i.e., Microsoft and Screaming Eagle go up and down completely randomly.

Pair Corralation between Microsoft and Screaming Eagle

If you would invest  43,048  in Microsoft on September 16, 2024 and sell it today you would earn a total of  1,679  from holding Microsoft or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.54%
Values	Daily Returns

Microsoft  vs.  Screaming Eagle Acquisition

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Screaming Eagle Acqu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Screaming Eagle Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Screaming Eagle is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Screaming Eagle

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

The idea behind Microsoft and Screaming Eagle Acquisition 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.