Correlation Between Microsoft and Aston Martin
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aston Martin 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 Aston Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aston Martin Lagonda, you can compare the effects of market volatilities on Microsoft and Aston Martin 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 Aston Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aston Martin.
Diversification Opportunities for Microsoft and Aston Martin
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Aston is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aston Martin Lagonda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aston Martin Lagonda 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 Aston Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aston Martin Lagonda has no effect on the direction of Microsoft i.e., Microsoft and Aston Martin go up and down completely randomly.
Pair Corralation between Microsoft and Aston Martin
Given the investment horizon of 90 days Microsoft is expected to generate 0.39 times more return on investment than Aston Martin. However, Microsoft is 2.58 times less risky than Aston Martin. It trades about 0.03 of its potential returns per unit of risk. Aston Martin Lagonda is currently generating about -0.06 per unit of risk. If you would invest 40,264 in Microsoft on September 1, 2024 and sell it today you would earn a total of 2,082 from holding Microsoft or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Aston Martin Lagonda
Performance |
| Timeline |
| Microsoft |
| Aston Martin Lagonda |
Microsoft and Aston Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aston Martin
The main advantage of trading using opposite Microsoft and Aston Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aston Martin 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 Aston Martin will offset losses from the drop in Aston Martin's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Aston Martin vs. Geely Automobile Holdings | Aston Martin vs. Guangzhou Automobile Group | Aston Martin vs. Dowlais Group plc | Aston Martin vs. NFI Group |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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