Correlation Between Microsoft and Ssga Sp

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

By analyzing existing cross correlation between Microsoft and Ssga Sp 500, you can compare the effects of market volatilities on Microsoft and Ssga Sp 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 Ssga Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ssga Sp.

Diversification Opportunities for Microsoft and Ssga Sp

0.9

Correlation Coefficient

Microsoft  Ssga Sp

Almost no diversification

The 3 months correlation between Microsoft and Ssga is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ssga Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ssga Sp 500 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 Ssga Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ssga Sp 500 has no effect on the direction of Microsoft i.e., Microsoft and Ssga Sp go up and down completely randomly.

Pair Corralation between Microsoft and Ssga Sp

Given the investment horizon of 90 days Microsoft is expected to generate 1.3 times more return on investment than Ssga Sp. However, Microsoft is 1.3 times more volatile than Ssga Sp 500. It trades about -0.04 of its potential returns per unit of risk. Ssga Sp 500 is currently generating about -0.11 per unit of risk. If you would invest  41,732  in Microsoft on January 16, 2024 and sell it today you would lose (368.00) from holding Microsoft or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Ssga Sp 500

Microsoft

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Ssga Sp 500

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ssga Sp 500 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ssga Sp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Microsoft and Ssga Sp

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

The idea behind Microsoft and Ssga Sp 500 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.