Correlation Between Microsoft and Senior Connect

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

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

Diversification Opportunities for Microsoft and Senior Connect

0.15

Correlation Coefficient

Microsoft  Senior Connect

Average diversification

The 3 months correlation between Microsoft and Senior is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Senior Connect Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senior Connect Acqui 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 Senior Connect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senior Connect Acqui has no effect on the direction of Microsoft i.e., Microsoft and Senior Connect go up and down completely randomly.

Pair Corralation between Microsoft and Senior Connect

If you would invest  43,781  in Microsoft on September 19, 2024 and sell it today you would lose (42.00) from holding Microsoft or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Microsoft  vs.  Senior Connect Acquisition

Microsoft

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Senior Connect Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Senior Connect Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Senior Connect is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Senior Connect

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

The idea behind Microsoft and Senior Connect 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.