Correlation Between Microsoft and Amazing Microelectronic
Can any of the company-specific risk be diversified away by investing in both Microsoft and Amazing Microelectronic 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 Amazing Microelectronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Amazing Microelectronic, you can compare the effects of market volatilities on Microsoft and Amazing Microelectronic 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 Amazing Microelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Amazing Microelectronic.
Diversification Opportunities for Microsoft and Amazing Microelectronic
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Amazing is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Amazing Microelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazing Microelectronic 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 Amazing Microelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazing Microelectronic has no effect on the direction of Microsoft i.e., Microsoft and Amazing Microelectronic go up and down completely randomly.
Pair Corralation between Microsoft and Amazing Microelectronic
Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than Amazing Microelectronic. However, Microsoft is 1.46 times less risky than Amazing Microelectronic. It trades about 0.08 of its potential returns per unit of risk. Amazing Microelectronic is currently generating about 0.02 per unit of risk. If you would invest 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,069 from holding Microsoft or generate 67.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.97% |
| Values | Daily Returns |
Microsoft vs. Amazing Microelectronic
Performance |
| Timeline |
| Microsoft |
| Amazing Microelectronic |
Microsoft and Amazing Microelectronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Amazing Microelectronic
The main advantage of trading using opposite Microsoft and Amazing Microelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Amazing Microelectronic 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 Amazing Microelectronic will offset losses from the drop in Amazing Microelectronic's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Amazing Microelectronic vs. Taiwan Semiconductor Manufacturing | Amazing Microelectronic vs. Yang Ming Marine | Amazing Microelectronic vs. ASE Industrial Holding | Amazing Microelectronic vs. AU Optronics |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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