Correlation Between Microsoft and AC SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and AC SA 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 AC SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AC SA, you can compare the effects of market volatilities on Microsoft and AC SA 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 AC SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AC SA.
Diversification Opportunities for Microsoft and AC SA
Pay attention - limited upside
The 3 months correlation between Microsoft and ACG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AC SA 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 AC SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AC SA has no effect on the direction of Microsoft i.e., Microsoft and AC SA go up and down completely randomly.
Pair Corralation between Microsoft and AC SA
Given the investment horizon of 90 days Microsoft is expected to under-perform the AC SA. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.03 times less risky than AC SA. The stock trades about -0.07 of its potential returns per unit of risk. The AC SA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,010 in AC SA on October 23, 2024 and sell it today you would earn a total of 120.00 from holding AC SA or generate 3.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 88.89% |
Values | Daily Returns |
Microsoft vs. AC SA
Performance |
Timeline |
Microsoft |
AC SA |
Microsoft and AC SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and AC SA
The main advantage of trading using opposite Microsoft and AC SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AC SA 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 AC SA will offset losses from the drop in AC SA's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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