Correlation Between Microsoft and SmartSet Automation

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

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

Diversification Opportunities for Microsoft and SmartSet Automation

0.36

Correlation Coefficient

Microsoft  SmartSet Automation

Weak diversification

The 3 months correlation between Microsoft and SmartSet is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SmartSet Automation LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartSet Automation LLC 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 SmartSet Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartSet Automation LLC has no effect on the direction of Microsoft i.e., Microsoft and SmartSet Automation go up and down completely randomly.

Pair Corralation between Microsoft and SmartSet Automation

Given the investment horizon of 90 days Microsoft is expected to generate 13.13 times less return on investment than SmartSet Automation. But when comparing it to its historical volatility, Microsoft is 8.77 times less risky than SmartSet Automation. It trades about 0.05 of its potential returns per unit of risk. SmartSet Automation LLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.13  in SmartSet Automation LLC on September 3, 2024 and sell it today you would earn a total of  0.02  from holding SmartSet Automation LLC or generate 15.38% return on investment over 90 days.

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

Microsoft  vs.  SmartSet Automation LLC

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

SmartSet Automation LLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SmartSet Automation LLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, SmartSet Automation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and SmartSet Automation

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

The idea behind Microsoft and SmartSet Automation LLC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..