Correlation Between Microsoft and AECOM TECHNOLOGY
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
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and AECOM is 0.7. 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 52.63 times less return on investment than AECOM TECHNOLOGY. But when comparing it to its historical volatility, Microsoft is 1.3 times less risky than AECOM TECHNOLOGY. It trades about 0.0 of its potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 10,000 in AECOM TECHNOLOGY on August 31, 2024 and sell it today you would earn a total of 1,000.00 from holding AECOM TECHNOLOGY or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. AECOM TECHNOLOGY
Performance |
| Timeline |
| Microsoft |
| AECOM TECHNOLOGY |
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.| Microsoft vs. PLAYTIKA HOLDING DL 01 | Microsoft vs. Apollo Investment Corp | Microsoft vs. MGIC INVESTMENT | Microsoft vs. LG Display Co |
| AECOM TECHNOLOGY vs. SIVERS SEMICONDUCTORS AB | AECOM TECHNOLOGY vs. Darden Restaurants | AECOM TECHNOLOGY vs. Reliance Steel Aluminum | AECOM TECHNOLOGY vs. Q2M Managementberatung AG |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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