Correlation Between Microsoft and ABCO Electronics
Can any of the company-specific risk be diversified away by investing in both Microsoft and ABCO Electronics 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 ABCO Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ABCO Electronics Co, you can compare the effects of market volatilities on Microsoft and ABCO Electronics 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 ABCO Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ABCO Electronics.
Diversification Opportunities for Microsoft and ABCO Electronics
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and ABCO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ABCO Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABCO Electronics 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 ABCO Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABCO Electronics has no effect on the direction of Microsoft i.e., Microsoft and ABCO Electronics go up and down completely randomly.
Pair Corralation between Microsoft and ABCO Electronics
Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than ABCO Electronics. However, Microsoft is 2.22 times less risky than ABCO Electronics. It trades about 0.0 of its potential returns per unit of risk. ABCO Electronics Co is currently generating about -0.09 per unit of risk. If you would invest 37,910 in Microsoft on January 21, 2025 and sell it today you would lose (1,132) from holding Microsoft or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.86% |
| Values | Daily Returns |
Microsoft vs. ABCO Electronics Co
Performance |
| Timeline |
| Microsoft |
| ABCO Electronics |
Microsoft and ABCO Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ABCO Electronics
The main advantage of trading using opposite Microsoft and ABCO Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ABCO Electronics 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 ABCO Electronics will offset losses from the drop in ABCO Electronics' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| ABCO Electronics vs. Korean Drug Co | ABCO Electronics vs. Cheryong Industrial CoLtd | ABCO Electronics vs. Solution Advanced Technology | ABCO Electronics vs. Busan Industrial Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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