Correlation Between Microsoft and AmTrust Financial
Can any of the company-specific risk be diversified away by investing in both Microsoft and AmTrust Financial 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 AmTrust Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AmTrust Financial Services, you can compare the effects of market volatilities on Microsoft and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AmTrust Financial.
Diversification Opportunities for Microsoft and AmTrust Financial
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and AmTrust is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Microsoft i.e., Microsoft and AmTrust Financial go up and down completely randomly.
Pair Corralation between Microsoft and AmTrust Financial
Given the investment horizon of 90 days Microsoft is expected to generate 1.46 times less return on investment than AmTrust Financial. But when comparing it to its historical volatility, Microsoft is 1.93 times less risky than AmTrust Financial. It trades about 0.07 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,123 in AmTrust Financial Services on August 25, 2024 and sell it today you would earn a total of 357.00 from holding AmTrust Financial Services or generate 31.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Microsoft vs. AmTrust Financial Services
Performance |
| Timeline |
| Microsoft |
| AmTrust Financial |
Microsoft and AmTrust Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AmTrust Financial
The main advantage of trading using opposite Microsoft and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AmTrust Financial 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 AmTrust Financial will offset losses from the drop in AmTrust Financial's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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