Correlation Between Microsoft and Adobe
Can any of the company-specific risk be diversified away by investing in both Microsoft and Adobe 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 Adobe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Adobe Inc, you can compare the effects of market volatilities on Microsoft and Adobe 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 Adobe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Adobe.
Diversification Opportunities for Microsoft and Adobe
Significant diversification
The 3 months correlation between Microsoft and Adobe is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc 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 Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of Microsoft i.e., Microsoft and Adobe go up and down completely randomly.
Pair Corralation between Microsoft and Adobe
Assuming the 90 days horizon Microsoft is expected to under-perform the Adobe. In addition to that, Microsoft is 1.52 times more volatile than Adobe Inc. It trades about -0.05 of its total potential returns per unit of risk. Adobe Inc is currently generating about 0.12 per unit of volatility. If you would invest 40,770 in Adobe Inc on November 9, 2024 and sell it today you would earn a total of 1,410 from holding Adobe Inc or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Adobe Inc
Performance |
| Timeline |
| Microsoft |
| Adobe Inc |
Microsoft and Adobe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Adobe
The main advantage of trading using opposite Microsoft and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Adobe 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 Adobe will offset losses from the drop in Adobe's long position.The idea behind Microsoft and Adobe Inc 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.| Adobe vs. DXC Technology Co | Adobe vs. THORNEY TECHS LTD | Adobe vs. Firan Technology Group | Adobe vs. AAC TECHNOLOGHLDGADR |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Stocks Directory Find actively traded stocks across global markets |