Correlation Between SWEDISH MATCH and Microsoft Corp

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Can any of the company-specific risk be diversified away by investing in both SWEDISH MATCH and Microsoft Corp 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 SWEDISH MATCH and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SWEDISH MATCH AB and Microsoft Corp, you can compare the effects of market volatilities on SWEDISH MATCH and Microsoft Corp 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 SWEDISH MATCH with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWEDISH MATCH and Microsoft Corp.

Diversification Opportunities for SWEDISH MATCH and Microsoft Corp

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between SWEDISH and Microsoft is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SWEDISH MATCH AB and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and SWEDISH MATCH 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 SWEDISH MATCH AB are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of SWEDISH MATCH i.e., SWEDISH MATCH and Microsoft Corp go up and down completely randomly.

Pair Corralation between SWEDISH MATCH and Microsoft Corp

Assuming the 90 days horizon SWEDISH MATCH AB is expected to generate 2.22 times more return on investment than Microsoft Corp. However, SWEDISH MATCH is 2.22 times more volatile than Microsoft Corp. It trades about 0.03 of its potential returns per unit of risk. Microsoft Corp is currently generating about 0.02 per unit of risk. If you would invest  760.00  in SWEDISH MATCH AB on August 30, 2022 and sell it today you would earn a total of  202.00  from holding SWEDISH MATCH AB or generate 26.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

SWEDISH MATCH AB  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
SWEDISH MATCH AB 
SWEDISH Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SWEDISH MATCH AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish basic indicators, SWEDISH MATCH may actually be approaching a critical reversion point that can send shares even higher in December 2022.

SWEDISH Price Channel

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

SWEDISH MATCH and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SWEDISH MATCH and Microsoft Corp

The main advantage of trading using opposite SWEDISH MATCH and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWEDISH MATCH position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
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The idea behind SWEDISH MATCH AB and Microsoft Corp 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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