Correlation Between Microsoft and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both Microsoft and Arbor Realty 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 Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Arbor Realty Trust, you can compare the effects of market volatilities on Microsoft and Arbor Realty 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 Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Arbor Realty.
Diversification Opportunities for Microsoft and Arbor Realty
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Arbor is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Arbor Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Realty Trust 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 Arbor Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Realty Trust has no effect on the direction of Microsoft i.e., Microsoft and Arbor Realty go up and down completely randomly.
Pair Corralation between Microsoft and Arbor Realty
Given the investment horizon of 90 days Microsoft is expected to generate 0.99 times more return on investment than Arbor Realty. However, Microsoft is 1.01 times less risky than Arbor Realty. It trades about 0.06 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.05 per unit of risk. If you would invest 33,425 in Microsoft on August 28, 2024 and sell it today you would earn a total of 8,454 from holding Microsoft or generate 25.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Arbor Realty Trust
Performance |
| Timeline |
| Microsoft |
| Arbor Realty Trust |
Microsoft and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Arbor Realty
The main advantage of trading using opposite Microsoft and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Arbor Realty 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 Arbor Realty will offset losses from the drop in Arbor Realty's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Arbor Realty vs. Arbor Realty Trust | Arbor Realty vs. Arbor Realty Trust | Arbor Realty vs. ACRES Commercial Realty | Arbor Realty vs. ARMOUR Residential REIT |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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