Correlation Between Microsoft and AECOM TECHNOLOGY

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Microsoft and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AECOM TECHNOLOGY, you can compare the effects of market volatilities on Microsoft and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AECOM TECHNOLOGY.

Diversification Opportunities for Microsoft and AECOM TECHNOLOGY

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Microsoft and AECOM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of Microsoft i.e., Microsoft and AECOM TECHNOLOGY go up and down completely randomly.

Pair Corralation between Microsoft and AECOM TECHNOLOGY

Assuming the 90 days trading horizon Microsoft is expected to generate 1.65 times more return on investment than AECOM TECHNOLOGY. However, Microsoft is 1.65 times more volatile than AECOM TECHNOLOGY. It trades about 0.21 of its potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about -0.5 per unit of risk. If you would invest  39,660  in Microsoft on September 26, 2024 and sell it today you would earn a total of  2,040  from holding Microsoft or generate 5.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  AECOM TECHNOLOGY

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.
AECOM TECHNOLOGY 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AECOM TECHNOLOGY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AECOM TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Microsoft and AECOM TECHNOLOGY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and AECOM TECHNOLOGY

The main advantage of trading using opposite Microsoft and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AECOM TECHNOLOGY 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 AECOM TECHNOLOGY will offset losses from the drop in AECOM TECHNOLOGY's long position.
The idea behind Microsoft and AECOM TECHNOLOGY pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

Other Complementary Tools

Share Portfolio
Track or share privately all of your investments from the convenience of any device
Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Commodity Directory
Find actively traded commodities issued by global exchanges