Correlation Between Microsoft and AFRICAN DISTILLERS
Can any of the company-specific risk be diversified away by investing in both Microsoft and AFRICAN DISTILLERS 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 AFRICAN DISTILLERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AFRICAN DISTILLERS LIMITED, you can compare the effects of market volatilities on Microsoft and AFRICAN DISTILLERS 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 AFRICAN DISTILLERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AFRICAN DISTILLERS.
Diversification Opportunities for Microsoft and AFRICAN DISTILLERS
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and AFRICAN is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AFRICAN DISTILLERS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICAN DISTILLERS 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 AFRICAN DISTILLERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICAN DISTILLERS has no effect on the direction of Microsoft i.e., Microsoft and AFRICAN DISTILLERS go up and down completely randomly.
Pair Corralation between Microsoft and AFRICAN DISTILLERS
Given the investment horizon of 90 days Microsoft is expected to generate 4.68 times more return on investment than AFRICAN DISTILLERS. However, Microsoft is 4.68 times more volatile than AFRICAN DISTILLERS LIMITED. It trades about 0.19 of its potential returns per unit of risk. AFRICAN DISTILLERS LIMITED is currently generating about 0.22 per unit of risk. If you would invest 42,483 in Microsoft on October 29, 2024 and sell it today you would earn a total of 1,923 from holding Microsoft or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Microsoft vs. AFRICAN DISTILLERS LIMITED
Performance |
| Timeline |
| Microsoft |
| AFRICAN DISTILLERS |
Microsoft and AFRICAN DISTILLERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AFRICAN DISTILLERS
The main advantage of trading using opposite Microsoft and AFRICAN DISTILLERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AFRICAN DISTILLERS 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 AFRICAN DISTILLERS will offset losses from the drop in AFRICAN DISTILLERS's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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