Correlation Between Microsoft and Asia Pacific
Can any of the company-specific risk be diversified away by investing in both Microsoft and Asia Pacific 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 Asia Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Asia Pacific Investment, you can compare the effects of market volatilities on Microsoft and Asia Pacific 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 Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Asia Pacific.
Diversification Opportunities for Microsoft and Asia Pacific
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Asia is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Asia Pacific Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Investment 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 Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Investment has no effect on the direction of Microsoft i.e., Microsoft and Asia Pacific go up and down completely randomly.
Pair Corralation between Microsoft and Asia Pacific
Given the investment horizon of 90 days Microsoft is expected to generate 0.36 times more return on investment than Asia Pacific. However, Microsoft is 2.8 times less risky than Asia Pacific. It trades about 0.08 of its potential returns per unit of risk. Asia Pacific Investment is currently generating about -0.01 per unit of risk. If you would invest 24,341 in Microsoft on August 29, 2024 and sell it today you would earn a total of 17,958 from holding Microsoft or generate 73.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Microsoft vs. Asia Pacific Investment
Performance |
| Timeline |
| Microsoft |
| Asia Pacific Investment |
Microsoft and Asia Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Asia Pacific
The main advantage of trading using opposite Microsoft and Asia Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Asia Pacific 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 Asia Pacific will offset losses from the drop in Asia Pacific's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Asia Pacific vs. FIT INVEST JSC | Asia Pacific vs. Damsan JSC | Asia Pacific vs. An Phat Plastic | Asia Pacific vs. Alphanam ME |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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