Correlation Between Microsoft and AFC Gamma
Can any of the company-specific risk be diversified away by investing in both Microsoft and AFC Gamma 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 AFC Gamma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AFC Gamma, you can compare the effects of market volatilities on Microsoft and AFC Gamma 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 AFC Gamma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AFC Gamma.
Diversification Opportunities for Microsoft and AFC Gamma
Weak diversification
The 3 months correlation between Microsoft and AFC is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AFC Gamma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Gamma 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 AFC Gamma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Gamma has no effect on the direction of Microsoft i.e., Microsoft and AFC Gamma go up and down completely randomly.
Pair Corralation between Microsoft and AFC Gamma
Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than AFC Gamma. However, Microsoft is 1.35 times less risky than AFC Gamma. It trades about 0.08 of its potential returns per unit of risk. AFC Gamma is currently generating about 0.03 per unit of risk. If you would invest 24,616 in Microsoft on August 24, 2024 and sell it today you would earn a total of 16,632 from holding Microsoft or generate 67.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. AFC Gamma
Performance |
| Timeline |
| Microsoft |
| AFC Gamma |
Microsoft and AFC Gamma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AFC Gamma
The main advantage of trading using opposite Microsoft and AFC Gamma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AFC Gamma 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 AFC Gamma will offset losses from the drop in AFC Gamma's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| AFC Gamma vs. Newlake Capital Partners | AFC Gamma vs. SBA Communications Corp | AFC Gamma vs. Gladstone Land | AFC Gamma vs. Lamar Advertising |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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