Correlation Between Microsoft and Adobe Systems
Can any of the company-specific risk be diversified away by investing in both Microsoft and Adobe Systems 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 Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Adobe Systems Incorporated, you can compare the effects of market volatilities on Microsoft and Adobe Systems 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 Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Adobe Systems.
Diversification Opportunities for Microsoft and Adobe Systems
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Adobe is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Adobe Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems 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 Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems has no effect on the direction of Microsoft i.e., Microsoft and Adobe Systems go up and down completely randomly.
Pair Corralation between Microsoft and Adobe Systems
Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than Adobe Systems. However, Microsoft is 1.45 times less risky than Adobe Systems. It trades about 0.08 of its potential returns per unit of risk. Adobe Systems Incorporated is currently generating about 0.05 per unit of risk. If you would invest 25,090 in Microsoft on August 23, 2024 and sell it today you would earn a total of 16,197 from holding Microsoft or generate 64.56% 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 Systems Incorporated
Performance |
| Timeline |
| Microsoft |
| Adobe Systems |
Microsoft and Adobe Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Adobe Systems
The main advantage of trading using opposite Microsoft and Adobe Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Adobe Systems 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 Systems will offset losses from the drop in Adobe Systems' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Adobe Systems vs. Crowdstrike Holdings | Adobe Systems vs. Palantir Technologies | Adobe Systems vs. Zscaler | Adobe Systems vs. Palo Alto Networks |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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