Correlation Between Affirm Holdings and Microsoft
Can any of the company-specific risk be diversified away by investing in both Affirm Holdings 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 Affirm Holdings and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Affirm Holdings and Microsoft, you can compare the effects of market volatilities on Affirm Holdings 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 Affirm Holdings with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affirm Holdings and Microsoft.
Diversification Opportunities for Affirm Holdings and Microsoft
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Affirm and Microsoft is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Affirm Holdings 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 Affirm Holdings 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 Affirm Holdings i.e., Affirm Holdings and Microsoft go up and down completely randomly.
Pair Corralation between Affirm Holdings and Microsoft
Given the investment horizon of 90 days Affirm Holdings is expected to generate 3.76 times more return on investment than Microsoft. However, Affirm Holdings is 3.76 times more volatile than Microsoft. It trades about 0.4 of its potential returns per unit of risk. Microsoft is currently generating about -0.04 per unit of risk. If you would invest 4,212 in Affirm Holdings on August 28, 2024 and sell it today you would earn a total of 2,723 from holding Affirm Holdings or generate 64.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Affirm Holdings vs. Microsoft
Performance |
| Timeline |
| Affirm Holdings |
| Microsoft |
Affirm Holdings and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Affirm Holdings and Microsoft
The main advantage of trading using opposite Affirm Holdings and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affirm Holdings 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.| Affirm Holdings vs. Upstart Holdings | Affirm Holdings vs. SoFi Technologies | Affirm Holdings vs. Roblox Corp | Affirm Holdings vs. Robinhood Markets |
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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 the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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