Correlation Between Microsoft and Alfen NV
Can any of the company-specific risk be diversified away by investing in both Microsoft and Alfen NV 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 Alfen NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Alfen NV, you can compare the effects of market volatilities on Microsoft and Alfen NV 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 Alfen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Alfen NV.
Diversification Opportunities for Microsoft and Alfen NV
Very good diversification
The 3 months correlation between Microsoft and Alfen is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV 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 Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of Microsoft i.e., Microsoft and Alfen NV go up and down completely randomly.
Pair Corralation between Microsoft and Alfen NV
Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than Alfen NV. However, Microsoft is 2.24 times less risky than Alfen NV. It trades about 0.08 of its potential returns per unit of risk. Alfen NV is currently generating about -0.12 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 Against |
| Strength | Insignificant |
| Accuracy | 87.1% |
| Values | Daily Returns |
Microsoft vs. Alfen NV
Performance |
| Timeline |
| Microsoft |
| Alfen NV |
Microsoft and Alfen NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Alfen NV
The main advantage of trading using opposite Microsoft and Alfen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Alfen NV 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 Alfen NV will offset losses from the drop in Alfen NV's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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