Correlation Between Microsoft and Acrow
Can any of the company-specific risk be diversified away by investing in both Microsoft and Acrow 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 Acrow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Acrow Limited, you can compare the effects of market volatilities on Microsoft and Acrow 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 Acrow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Acrow.
Diversification Opportunities for Microsoft and Acrow
Average diversification
The 3 months correlation between Microsoft and Acrow is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Acrow Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acrow Limited 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 Acrow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acrow Limited has no effect on the direction of Microsoft i.e., Microsoft and Acrow go up and down completely randomly.
Pair Corralation between Microsoft and Acrow
Given the investment horizon of 90 days Microsoft is expected to generate 4.06 times less return on investment than Acrow. But when comparing it to its historical volatility, Microsoft is 1.42 times less risky than Acrow. It trades about 0.05 of its potential returns per unit of risk. Acrow Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 92.00 in Acrow Limited on September 2, 2024 and sell it today you would earn a total of 16.00 from holding Acrow Limited or generate 17.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.97% |
| Values | Daily Returns |
Microsoft vs. Acrow Limited
Performance |
| Timeline |
| Microsoft |
| Acrow Limited |
Microsoft and Acrow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Acrow
The main advantage of trading using opposite Microsoft and Acrow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Acrow 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 Acrow will offset losses from the drop in Acrow's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Acrow vs. Jupiter Energy | Acrow vs. WA1 Resources | Acrow vs. Predictive Discovery | Acrow vs. Cooper Metals |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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