Correlation Between Apple and Microsoft Corp
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc CDR and Microsoft Corp CDR, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Microsoft Corp.
Diversification Opportunities for Apple and Microsoft Corp
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Apple and Microsoft is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR and Apple 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 Apple Inc CDR 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 CDR has no effect on the direction of Apple i.e., Apple and Microsoft Corp go up and down completely randomly.
Pair Corralation between Apple and Microsoft Corp
Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 0.63 times more return on investment than Microsoft Corp. However, Apple Inc CDR is 1.58 times less risky than Microsoft Corp. It trades about -0.01 of its potential returns per unit of risk. Microsoft Corp CDR is currently generating about -0.04 per unit of risk. If you would invest 3,425 in Apple Inc CDR on August 28, 2024 and sell it today you would lose (13.00) from holding Apple Inc CDR or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc CDR vs. Microsoft Corp CDR
Performance |
| Timeline |
| Apple Inc CDR |
| Microsoft Corp CDR |
Apple and Microsoft Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Microsoft Corp
The main advantage of trading using opposite Apple and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. T2 Metals Corp | Apple vs. Precious Metals And | Apple vs. Cogeco Communications | Apple vs. Advent Wireless |
| Microsoft Corp vs. Telus Corp | Microsoft Corp vs. Toronto Dominion Bank | Microsoft Corp vs. Manulife Financial Corp | Microsoft Corp vs. Canadian Natural Resources |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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