Correlation Between Microsoft and AIA Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and AIA Group 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 AIA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AIA Group Ltd, you can compare the effects of market volatilities on Microsoft and AIA Group 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 AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AIA Group.
Diversification Opportunities for Microsoft and AIA Group
Significant diversification
The 3 months correlation between Microsoft and AIA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group 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 AIA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIA Group has no effect on the direction of Microsoft i.e., Microsoft and AIA Group go up and down completely randomly.
Pair Corralation between Microsoft and AIA Group
Given the investment horizon of 90 days Microsoft is expected to generate 1.0 times more return on investment than AIA Group. However, Microsoft is 1.0 times more volatile than AIA Group Ltd. It trades about -0.04 of its potential returns per unit of risk. AIA Group Ltd is currently generating about -0.16 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. AIA Group Ltd
Performance |
| Timeline |
| Microsoft |
| AIA Group |
Microsoft and AIA Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AIA Group
The main advantage of trading using opposite Microsoft and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AIA Group 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 AIA Group will offset losses from the drop in AIA Group's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| AIA Group vs. Atlantic American | AIA Group vs. Ping An Insurance | AIA Group vs. China Life Insurance | AIA Group vs. Sanlam Ltd PK |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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