Correlation Between Microsoft and Aclara Resources
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aclara Resources 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 Aclara Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aclara Resources, you can compare the effects of market volatilities on Microsoft and Aclara Resources 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 Aclara Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aclara Resources.
Diversification Opportunities for Microsoft and Aclara Resources
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Aclara is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aclara Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aclara Resources 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 Aclara Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aclara Resources has no effect on the direction of Microsoft i.e., Microsoft and Aclara Resources go up and down completely randomly.
Pair Corralation between Microsoft and Aclara Resources
Given the investment horizon of 90 days Microsoft is expected to under-perform the Aclara Resources. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.7 times less risky than Aclara Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Aclara Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 35.00 in Aclara Resources on November 5, 2024 and sell it today you would earn a total of 3.00 from holding Aclara Resources or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Aclara Resources
Performance |
| Timeline |
| Microsoft |
| Aclara Resources |
Microsoft and Aclara Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aclara Resources
The main advantage of trading using opposite Microsoft and Aclara Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aclara Resources 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 Aclara Resources will offset losses from the drop in Aclara Resources' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Aclara Resources vs. Hannan Metals | Aclara Resources vs. Atco Mining | Aclara Resources vs. Leading Edge Materials | Aclara Resources vs. Arianne Phosphate |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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