Correlation Between Microsoft and AVY Precision
Can any of the company-specific risk be diversified away by investing in both Microsoft and AVY Precision 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 AVY Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AVY Precision Technology, you can compare the effects of market volatilities on Microsoft and AVY Precision 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 AVY Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AVY Precision.
Diversification Opportunities for Microsoft and AVY Precision
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and AVY is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AVY Precision Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVY Precision 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 AVY Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVY Precision Technology has no effect on the direction of Microsoft i.e., Microsoft and AVY Precision go up and down completely randomly.
Pair Corralation between Microsoft and AVY Precision
Given the investment horizon of 90 days Microsoft is expected to generate 0.56 times more return on investment than AVY Precision. However, Microsoft is 1.78 times less risky than AVY Precision. It trades about 0.08 of its potential returns per unit of risk. AVY Precision Technology is currently generating about 0.04 per unit of risk. If you would invest 24,843 in Microsoft on September 2, 2024 and sell it today you would earn a total of 17,503 from holding Microsoft or generate 70.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.98% |
| Values | Daily Returns |
Microsoft vs. AVY Precision Technology
Performance |
| Timeline |
| Microsoft |
| AVY Precision Technology |
Microsoft and AVY Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AVY Precision
The main advantage of trading using opposite Microsoft and AVY Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AVY Precision 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 AVY Precision will offset losses from the drop in AVY Precision's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| AVY Precision vs. Ability Enterprise Co | AVY Precision vs. XAC Automation | AVY Precision vs. Cheng Fwa Industrial | AVY Precision vs. Kaulin Mfg |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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