Correlation Between Microsoft and Adobe
Can any of the company-specific risk be diversified away by investing in both Microsoft and Adobe 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 Adobe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Adobe Inc, you can compare the effects of market volatilities on Microsoft and Adobe 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 Adobe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Adobe.
Diversification Opportunities for Microsoft and Adobe
Very good diversification
The 3 months correlation between Microsoft and Adobe is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc 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 Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of Microsoft i.e., Microsoft and Adobe go up and down completely randomly.
Pair Corralation between Microsoft and Adobe
Given the investment horizon of 90 days Microsoft is expected to generate 11.9 times less return on investment than Adobe. But when comparing it to its historical volatility, Microsoft is 1.34 times less risky than Adobe. It trades about 0.02 of its potential returns per unit of risk. Adobe Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 44,605 in Adobe Inc on August 28, 2024 and sell it today you would earn a total of 4,490 from holding Adobe Inc or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Adobe Inc
Performance |
| Timeline |
| Microsoft |
| Adobe Inc |
Microsoft and Adobe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Adobe
The main advantage of trading using opposite Microsoft and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Adobe 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 Adobe will offset losses from the drop in Adobe's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Adobe vs. REINET INVESTMENTS SCA | Adobe vs. WisdomTree Investments | Adobe vs. Strategic Investments AS | Adobe vs. DIVERSIFIED ROYALTY |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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