Correlation Between Microsoft and SmartKem, Common

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

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

Diversification Opportunities for Microsoft and SmartKem, Common

0.24

Correlation Coefficient

Microsoft  SmartKem, Common

Modest diversification

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

Pair Corralation between Microsoft and SmartKem, Common

Given the investment horizon of 90 days Microsoft is expected to generate 5.73 times less return on investment than SmartKem, Common. But when comparing it to its historical volatility, Microsoft is 10.69 times less risky than SmartKem, Common. It trades about 0.02 of its potential returns per unit of risk. SmartKem, Common Stock is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  461.00  in SmartKem, Common Stock on September 22, 2024 and sell it today you would lose (165.00) from holding SmartKem, Common Stock or give up 35.79% of portfolio value over 90 days.

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

Microsoft  vs.  SmartKem, Common Stock

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

SmartKem, Common Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartKem, Common Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating basic indicators, SmartKem, Common may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and SmartKem, Common

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

The idea behind Microsoft and SmartKem, Common Stock 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.