Correlation Between Microsoft and Aflac Incorporated
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aflac Incorporated 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 Aflac Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aflac Incorporated, you can compare the effects of market volatilities on Microsoft and Aflac Incorporated 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 Aflac Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aflac Incorporated.
Diversification Opportunities for Microsoft and Aflac Incorporated
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Aflac is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated 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 Aflac Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aflac Incorporated has no effect on the direction of Microsoft i.e., Microsoft and Aflac Incorporated go up and down completely randomly.
Pair Corralation between Microsoft and Aflac Incorporated
Given the investment horizon of 90 days Microsoft is expected to under-perform the Aflac Incorporated. In addition to that, Microsoft is 1.12 times more volatile than Aflac Incorporated. It trades about -0.04 of its total potential returns per unit of risk. Aflac Incorporated is currently generating about 0.26 per unit of volatility. If you would invest 9,905 in Aflac Incorporated on August 31, 2024 and sell it today you would earn a total of 935.00 from holding Aflac Incorporated or generate 9.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Aflac Incorporated
Performance |
| Timeline |
| Microsoft |
| Aflac Incorporated |
Microsoft and Aflac Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aflac Incorporated
The main advantage of trading using opposite Microsoft and Aflac Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aflac Incorporated 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 Aflac Incorporated will offset losses from the drop in Aflac Incorporated's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Aflac Incorporated vs. MOVIE GAMES SA | Aflac Incorporated vs. Evolution Mining Limited | Aflac Incorporated vs. SERI INDUSTRIAL EO | Aflac Incorporated vs. UNIVMUSIC GRPADR050 |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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