Correlation Between Microsoft and SKAGEN Global

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

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

Diversification Opportunities for Microsoft and SKAGEN Global

0.7

Correlation Coefficient

Microsoft  SKAGEN Global

Poor diversification

The 3 months correlation between Microsoft and SKAGEN is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SKAGEN Global A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKAGEN Global A 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKAGEN Global A has no effect on the direction of Microsoft i.e., Microsoft and SKAGEN Global go up and down completely randomly.

Pair Corralation between Microsoft and SKAGEN Global

Given the investment horizon of 90 days Microsoft is expected to under-perform the SKAGEN Global. In addition to that, Microsoft is 1.78 times more volatile than SKAGEN Global A. It trades about -0.14 of its total potential returns per unit of risk. SKAGEN Global A is currently generating about -0.22 per unit of volatility. If you would invest  239,700  in SKAGEN Global A on January 26, 2024 and sell it today you would lose (5,700) from holding SKAGEN Global A or give up 2.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Microsoft  vs.  SKAGEN Global A

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

SKAGEN Global A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SKAGEN Global A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, SKAGEN Global 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 SKAGEN Global

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

The idea behind Microsoft and SKAGEN Global A 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 Commodity Directory module to find actively traded commodities issued by global exchanges.