Correlation Between Microsoft and Allot Communications
Can any of the company-specific risk be diversified away by investing in both Microsoft and Allot Communications 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 Allot Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Allot Communications, you can compare the effects of market volatilities on Microsoft and Allot Communications 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 Allot Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Allot Communications.
Diversification Opportunities for Microsoft and Allot Communications
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Allot is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Allot Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allot Communications 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 Allot Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allot Communications has no effect on the direction of Microsoft i.e., Microsoft and Allot Communications go up and down completely randomly.
Pair Corralation between Microsoft and Allot Communications
Given the investment horizon of 90 days Microsoft is expected to generate 60.74 times less return on investment than Allot Communications. But when comparing it to its historical volatility, Microsoft is 3.55 times less risky than Allot Communications. It trades about 0.01 of its potential returns per unit of risk. Allot Communications is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 86,100 in Allot Communications on September 3, 2024 and sell it today you would earn a total of 74,300 from holding Allot Communications or generate 86.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 74.1% |
| Values | Daily Returns |
Microsoft vs. Allot Communications
Performance |
| Timeline |
| Microsoft |
| Allot Communications |
Microsoft and Allot Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Allot Communications
The main advantage of trading using opposite Microsoft and Allot Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Allot Communications 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 Allot Communications will offset losses from the drop in Allot Communications' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Allot Communications vs. Tower Semiconductor | Allot Communications vs. Nova | Allot Communications vs. Nice | Allot Communications vs. AudioCodes |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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