Correlation Between Microsoft and Südwestdeutsche Salzwerke

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

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

Diversification Opportunities for Microsoft and Südwestdeutsche Salzwerke

-0.55

Correlation Coefficient

Microsoft  Südwestdeutsche Salzwerke

Excellent diversification

The 3 months correlation between Microsoft and Südwestdeutsche is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sdwestdeutsche Salzwerke AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Südwestdeutsche Salzwerke 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 Südwestdeutsche Salzwerke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Südwestdeutsche Salzwerke has no effect on the direction of Microsoft i.e., Microsoft and Südwestdeutsche Salzwerke go up and down completely randomly.

Pair Corralation between Microsoft and Südwestdeutsche Salzwerke

Given the investment horizon of 90 days Microsoft is expected to generate 0.37 times more return on investment than Südwestdeutsche Salzwerke. However, Microsoft is 2.68 times less risky than Südwestdeutsche Salzwerke. It trades about -0.04 of its potential returns per unit of risk. Sdwestdeutsche Salzwerke AG is currently generating about -0.15 per unit of risk. If you would invest  41,034  in Microsoft on January 24, 2024 and sell it today you would lose (938.00) from holding Microsoft or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Microsoft  vs.  Sdwestdeutsche Salzwerke AG

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

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

Südwestdeutsche Salzwerke

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sdwestdeutsche Salzwerke AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and Südwestdeutsche Salzwerke

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

The idea behind Microsoft and Sdwestdeutsche Salzwerke AG 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.