Correlation Between Microsoft and Avenira
Can any of the company-specific risk be diversified away by investing in both Microsoft and Avenira 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 Avenira into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Avenira, you can compare the effects of market volatilities on Microsoft and Avenira 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 Avenira. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Avenira.
Diversification Opportunities for Microsoft and Avenira
Significant diversification
The 3 months correlation between Microsoft and Avenira is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Avenira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avenira 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 Avenira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avenira has no effect on the direction of Microsoft i.e., Microsoft and Avenira go up and down completely randomly.
Pair Corralation between Microsoft and Avenira
Given the investment horizon of 90 days Microsoft is expected to generate 4.12 times less return on investment than Avenira. But when comparing it to its historical volatility, Microsoft is 7.44 times less risky than Avenira. It trades about 0.06 of its potential returns per unit of risk. Avenira is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1.20 in Avenira on September 15, 2024 and sell it today you would lose (0.30) from holding Avenira or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.9% |
| Values | Daily Returns |
Microsoft vs. Avenira
Performance |
| Timeline |
| Microsoft |
| Avenira |
Microsoft and Avenira Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Avenira
The main advantage of trading using opposite Microsoft and Avenira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Avenira 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 Avenira will offset losses from the drop in Avenira's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Avenira vs. Platinum Asset Management | Avenira vs. Regal Funds Management | Avenira vs. Clime Investment Management | Avenira vs. Bluescope Steel |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |