Correlation Between Microsoft and SKAGEN M
Can any of the company-specific risk be diversified away by investing in both Microsoft and SKAGEN M 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 SKAGEN M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SKAGEN m, you can compare the effects of market volatilities on Microsoft and SKAGEN M 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 SKAGEN M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SKAGEN M.
Diversification Opportunities for Microsoft and SKAGEN M
Average diversification
The 3 months correlation between Microsoft and SKAGEN is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SKAGEN m in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKAGEN m 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 SKAGEN M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKAGEN m has no effect on the direction of Microsoft i.e., Microsoft and SKAGEN M go up and down completely randomly.
Pair Corralation between Microsoft and SKAGEN M
Given the investment horizon of 90 days Microsoft is expected to under-perform the SKAGEN M. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.03 times less risky than SKAGEN M. The stock trades about -0.03 of its potential returns per unit of risk. The SKAGEN m is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 16,735 in SKAGEN m on January 17, 2024 and sell it today you would lose (45.00) from holding SKAGEN m or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Microsoft vs. SKAGEN m
Performance |
| Timeline |
| Microsoft |
| SKAGEN m |
Microsoft and SKAGEN M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SKAGEN M
The main advantage of trading using opposite Microsoft and SKAGEN M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, SKAGEN M 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 SKAGEN M will offset losses from the drop in SKAGEN M's long position.| Microsoft vs. Cloudflare | Microsoft vs. Okta Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Nutanix |
| SKAGEN M vs. Novo Nordisk AS | SKAGEN M vs. Nordea Bank Abp | SKAGEN M vs. DSV Panalpina AS | SKAGEN M vs. AP Mller |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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