Correlation Between Microsoft and Alior Bank
Can any of the company-specific risk be diversified away by investing in both Microsoft and Alior Bank 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 Alior Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Alior Bank SA, you can compare the effects of market volatilities on Microsoft and Alior Bank 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 Alior Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Alior Bank.
Diversification Opportunities for Microsoft and Alior Bank
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Alior is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Alior Bank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alior Bank SA 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 Alior Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alior Bank SA has no effect on the direction of Microsoft i.e., Microsoft and Alior Bank go up and down completely randomly.
Pair Corralation between Microsoft and Alior Bank
Given the investment horizon of 90 days Microsoft is expected to generate 1.79 times less return on investment than Alior Bank. But when comparing it to its historical volatility, Microsoft is 1.8 times less risky than Alior Bank. It trades about 0.04 of its potential returns per unit of risk. Alior Bank SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,557 in Alior Bank SA on August 27, 2024 and sell it today you would earn a total of 1,463 from holding Alior Bank SA or generate 19.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Microsoft vs. Alior Bank SA
Performance |
| Timeline |
| Microsoft |
| Alior Bank SA |
Microsoft and Alior Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Alior Bank
The main advantage of trading using opposite Microsoft and Alior Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Alior Bank 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 Alior Bank will offset losses from the drop in Alior Bank's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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