Correlation Between Alfa Financial and Microsoft
Can any of the company-specific risk be diversified away by investing in both Alfa Financial and Microsoft 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 Alfa Financial and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Financial Software and Microsoft, you can compare the effects of market volatilities on Alfa Financial and Microsoft 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 Alfa Financial with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and Microsoft.
Diversification Opportunities for Alfa Financial and Microsoft
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alfa and Microsoft is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Alfa Financial 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 Alfa Financial Software are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Alfa Financial i.e., Alfa Financial and Microsoft go up and down completely randomly.
Pair Corralation between Alfa Financial and Microsoft
Assuming the 90 days trading horizon Alfa Financial is expected to generate 1.09 times less return on investment than Microsoft. In addition to that, Alfa Financial is 1.54 times more volatile than Microsoft. It trades about 0.05 of its total potential returns per unit of risk. Microsoft is currently generating about 0.08 per unit of volatility. If you would invest 22,987 in Microsoft on August 29, 2024 and sell it today you would earn a total of 17,013 from holding Microsoft or generate 74.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alfa Financial Software vs. Microsoft
Performance |
| Timeline |
| Alfa Financial Software |
| Microsoft |
Alfa Financial and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Financial and Microsoft
The main advantage of trading using opposite Alfa Financial and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial position performs unexpectedly, Microsoft 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 will offset losses from the drop in Microsoft's long position.| Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc |
| Microsoft vs. SERI INDUSTRIAL EO | Microsoft vs. AIR PRODCHEMICALS | Microsoft vs. KINGBOARD CHEMICAL | Microsoft vs. Quaker Chemical |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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