Correlation Between Microsoft and Adidas AG
Can any of the company-specific risk be diversified away by investing in both Microsoft and Adidas AG 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 Adidas AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and adidas AG, you can compare the effects of market volatilities on Microsoft and Adidas AG 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 Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Adidas AG.
Diversification Opportunities for Microsoft and Adidas AG
Good diversification
The 3 months correlation between Microsoft and Adidas is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Microsoft i.e., Microsoft and Adidas AG go up and down completely randomly.
Pair Corralation between Microsoft and Adidas AG
Given the investment horizon of 90 days Microsoft is expected to generate 0.7 times more return on investment than Adidas AG. However, Microsoft is 1.44 times less risky than Adidas AG. It trades about 0.05 of its potential returns per unit of risk. adidas AG is currently generating about -0.02 per unit of risk. If you would invest 40,862 in Microsoft on September 3, 2024 and sell it today you would earn a total of 1,484 from holding Microsoft or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Microsoft vs. adidas AG
Performance |
| Timeline |
| Microsoft |
| adidas AG |
Microsoft and Adidas AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Adidas AG
The main advantage of trading using opposite Microsoft and Adidas AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Adidas AG 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 Adidas AG will offset losses from the drop in Adidas AG's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Adidas AG vs. Scandinavian Tobacco Group | Adidas AG vs. NAKED WINES PLC | Adidas AG vs. Goodyear Tire Rubber | Adidas AG vs. SANOK RUBBER ZY |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |