Correlation Between Ameriprise Financial and Microsoft
Can any of the company-specific risk be diversified away by investing in both Ameriprise 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 Ameriprise Financial and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameriprise Financial and Microsoft, you can compare the effects of market volatilities on Ameriprise 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 Ameriprise Financial with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and Microsoft.
Diversification Opportunities for Ameriprise Financial and Microsoft
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ameriprise and Microsoft is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Ameriprise 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 Ameriprise Financial 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 Ameriprise Financial i.e., Ameriprise Financial and Microsoft go up and down completely randomly.
Pair Corralation between Ameriprise Financial and Microsoft
Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 2.43 times more return on investment than Microsoft. However, Ameriprise Financial is 2.43 times more volatile than Microsoft. It trades about 0.22 of its potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of risk. If you would invest 928,741 in Ameriprise Financial on August 29, 2024 and sell it today you would earn a total of 229,412 from holding Ameriprise Financial or generate 24.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ameriprise Financial vs. Microsoft
Performance |
| Timeline |
| Ameriprise Financial |
| Microsoft |
Ameriprise Financial and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameriprise Financial and Microsoft
The main advantage of trading using opposite Ameriprise Financial and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise 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.| Ameriprise Financial vs. Southwest Airlines | Ameriprise Financial vs. Deutsche Bank Aktiengesellschaft | Ameriprise Financial vs. Genworth Financial | Ameriprise Financial vs. New Oriental Education |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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