Correlation Between Microsoft and SIA Engineering

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

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

Diversification Opportunities for Microsoft and SIA Engineering

0.0

Correlation Coefficient

Microsoft  SIA Engineering

Pay attention - limited upside

The 3 months correlation between Microsoft and SIA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SIA Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIA Engineering 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 SIA Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIA Engineering has no effect on the direction of Microsoft i.e., Microsoft and SIA Engineering go up and down completely randomly.

Pair Corralation between Microsoft and SIA Engineering

If you would invest  40,206  in Microsoft on February 17, 2024 and sell it today you would earn a total of  1,893  from holding Microsoft or generate 4.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  SIA Engineering

Microsoft

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) 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.

SIA Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIA Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SIA Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and SIA Engineering

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

The idea behind Microsoft and SIA Engineering 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.