Correlation Between Microsoft and Able View

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Able View 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 Able View into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Able View Global, you can compare the effects of market volatilities on Microsoft and Able View 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 Able View. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Able View.

Diversification Opportunities for Microsoft and Able View

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Microsoft and Able is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Able View Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Able View Global 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 Able View. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Able View Global has no effect on the direction of Microsoft i.e., Microsoft and Able View go up and down completely randomly.

Pair Corralation between Microsoft and Able View

Given the investment horizon of 90 days Microsoft is expected to under-perform the Able View. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 15.65 times less risky than Able View. The stock trades about -0.04 of its potential returns per unit of risk. The Able View Global is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1.20  in Able View Global on August 31, 2024 and sell it today you would earn a total of  0.68  from holding Able View Global or generate 56.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy31.82%
ValuesDaily Returns

Microsoft  vs.  Able View Global

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Able View Global 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
Over the last 90 days Able View Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady basic indicators, Able View showed solid returns over the last few months and may actually be approaching a breakup point.

Microsoft and Able View Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Able View

The main advantage of trading using opposite Microsoft and Able View positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Able View 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 Able View will offset losses from the drop in Able View's long position.
The idea behind Microsoft and Able View Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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