Correlation Between Microsoft and Advantage Solutions
Can any of the company-specific risk be diversified away by investing in both Microsoft and Advantage Solutions 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 Advantage Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Advantage Solutions, you can compare the effects of market volatilities on Microsoft and Advantage Solutions 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 Advantage Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Advantage Solutions.
Diversification Opportunities for Microsoft and Advantage Solutions
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Advantage is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Advantage Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Solutions 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 Advantage Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Solutions has no effect on the direction of Microsoft i.e., Microsoft and Advantage Solutions go up and down completely randomly.
Pair Corralation between Microsoft and Advantage Solutions
Given the investment horizon of 90 days Microsoft is expected to generate 0.36 times more return on investment than Advantage Solutions. However, Microsoft is 2.79 times less risky than Advantage Solutions. It trades about 0.03 of its potential returns per unit of risk. Advantage Solutions is currently generating about -0.01 per unit of risk. If you would invest 40,978 in Microsoft on August 28, 2024 and sell it today you would earn a total of 901.00 from holding Microsoft or generate 2.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Advantage Solutions
Performance |
| Timeline |
| Microsoft |
| Advantage Solutions |
Microsoft and Advantage Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Advantage Solutions
The main advantage of trading using opposite Microsoft and Advantage Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Advantage Solutions 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 Advantage Solutions will offset losses from the drop in Advantage Solutions' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Advantage Solutions vs. ADTRAN Inc | Advantage Solutions vs. Belden Inc | Advantage Solutions vs. ADC Therapeutics SA | Advantage Solutions vs. Comtech Telecommunications Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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