Correlation Between Microsoft and AVITA Medical
Can any of the company-specific risk be diversified away by investing in both Microsoft and AVITA 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 AVITA Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AVITA Medical, you can compare the effects of market volatilities on Microsoft and AVITA 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 AVITA Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AVITA Medical.
Diversification Opportunities for Microsoft and AVITA Medical
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and AVITA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA 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 AVITA Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVITA Medical has no effect on the direction of Microsoft i.e., Microsoft and AVITA Medical go up and down completely randomly.
Pair Corralation between Microsoft and AVITA Medical
Assuming the 90 days trading horizon Microsoft is expected to generate 5.44 times less return on investment than AVITA Medical. But when comparing it to its historical volatility, Microsoft is 2.76 times less risky than AVITA Medical. It trades about 0.04 of its potential returns per unit of risk. AVITA Medical is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 173.00 in AVITA Medical on August 31, 2024 and sell it today you would earn a total of 63.00 from holding AVITA Medical or generate 36.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.23% |
| Values | Daily Returns |
Microsoft vs. AVITA Medical
Performance |
| Timeline |
| Microsoft |
| AVITA Medical |
Microsoft and AVITA Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AVITA Medical
The main advantage of trading using opposite Microsoft and AVITA Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AVITA 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 AVITA Medical will offset losses from the drop in AVITA Medical's long position.| Microsoft vs. Virtus Investment Partners | Microsoft vs. Food Life Companies | Microsoft vs. HK Electric Investments | Microsoft vs. Gladstone Investment |
| AVITA Medical vs. Apple Inc | AVITA Medical vs. Apple Inc | AVITA Medical vs. Apple Inc | AVITA 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |