Correlation Between Microsoft and Dassault Aviation
Can any of the company-specific risk be diversified away by investing in both Microsoft and Dassault Aviation 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 Dassault Aviation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Dassault Aviation SA, you can compare the effects of market volatilities on Microsoft and Dassault Aviation 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 Dassault Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Dassault Aviation.
Diversification Opportunities for Microsoft and Dassault Aviation
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Dassault is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation 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 Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Microsoft i.e., Microsoft and Dassault Aviation go up and down completely randomly.
Pair Corralation between Microsoft and Dassault Aviation
Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than Dassault Aviation. However, Microsoft is 1.45 times less risky than Dassault Aviation. It trades about 0.19 of its potential returns per unit of risk. Dassault Aviation SA is currently generating about 0.05 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Microsoft vs. Dassault Aviation SA
Performance |
| Timeline |
| Microsoft |
| Dassault Aviation |
Microsoft and Dassault Aviation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Dassault Aviation
The main advantage of trading using opposite Microsoft and Dassault Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Dassault Aviation 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 Dassault Aviation will offset losses from the drop in Dassault Aviation's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Dassault Aviation vs. Uniper SE | Dassault Aviation vs. Mulberry Group PLC | Dassault Aviation vs. London Security Plc | Dassault Aviation vs. Triad Group PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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