Correlation Between Air Transport and Microsoft
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and Microsoft, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Microsoft.
Diversification Opportunities for Air Transport and Microsoft
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Microsoft is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Microsoft go up and down completely randomly.
Pair Corralation between Air Transport and Microsoft
Assuming the 90 days horizon Air Transport is expected to generate 1.15 times less return on investment than Microsoft. But when comparing it to its historical volatility, Air Transport Services is 1.07 times less risky than Microsoft. It trades about 0.23 of its potential returns per unit of risk. Microsoft is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 37,427 in Microsoft on September 3, 2024 and sell it today you would earn a total of 2,418 from holding Microsoft or generate 6.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. Microsoft
Performance |
| Timeline |
| Air Transport Services |
| Microsoft |
Air Transport and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and Microsoft
The main advantage of trading using opposite Air Transport and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. Computershare Limited | Air Transport vs. Ribbon Communications | Air Transport vs. Axcelis Technologies | Air Transport vs. Playtech plc |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |