Correlation Between Microsoft and Avanos Medical
Can any of the company-specific risk be diversified away by investing in both Microsoft and Avanos Medical 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 Microsoft and Avanos Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Avanos Medical, you can compare the effects of market volatilities on Microsoft and Avanos Medical 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 Microsoft with a short position of Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Avanos Medical.
Diversification Opportunities for Microsoft and Avanos Medical
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Avanos is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical and Microsoft 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 Microsoft are associated (or correlated) with Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Microsoft i.e., Microsoft and Avanos Medical go up and down completely randomly.
Pair Corralation between Microsoft and Avanos Medical
Assuming the 90 days trading horizon Microsoft is expected to generate 0.55 times more return on investment than Avanos Medical. However, Microsoft is 1.81 times less risky than Avanos Medical. It trades about 0.04 of its potential returns per unit of risk. Avanos Medical is currently generating about 0.01 per unit of risk. If you would invest 37,532 in Microsoft on September 1, 2024 and sell it today you would earn a total of 2,313 from holding Microsoft or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Avanos Medical
Performance |
| Timeline |
| Microsoft |
| Avanos Medical |
Microsoft and Avanos Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Avanos Medical
The main advantage of trading using opposite Microsoft and Avanos Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Avanos Medical 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 Avanos Medical will offset losses from the drop in Avanos Medical's long position.| Microsoft vs. Gold Road Resources | Microsoft vs. Air Transport Services | Microsoft vs. Taiwan Semiconductor Manufacturing | Microsoft vs. Nordic Semiconductor ASA |
| Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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