Correlation Between Microsoft and Arkema SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Arkema SA 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 Arkema SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Arkema SA ADR, you can compare the effects of market volatilities on Microsoft and Arkema SA 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 Arkema SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Arkema SA.
Diversification Opportunities for Microsoft and Arkema SA
Good diversification
The 3 months correlation between Microsoft and Arkema is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Arkema SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA ADR 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 Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA ADR has no effect on the direction of Microsoft i.e., Microsoft and Arkema SA go up and down completely randomly.
Pair Corralation between Microsoft and Arkema SA
Given the investment horizon of 90 days Microsoft is expected to generate 0.75 times more return on investment than Arkema SA. However, Microsoft is 1.34 times less risky than Arkema SA. It trades about 0.06 of its potential returns per unit of risk. Arkema SA ADR is currently generating about -0.01 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Microsoft vs. Arkema SA ADR
Performance |
| Timeline |
| Microsoft |
| Arkema SA ADR |
Microsoft and Arkema SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Arkema SA
The main advantage of trading using opposite Microsoft and Arkema SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Arkema SA 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 Arkema SA will offset losses from the drop in Arkema SA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Arkema SA vs. Akzo Nobel NV | Arkema SA vs. Avoca LLC | Arkema SA vs. AGC Inc ADR | Arkema SA vs. AirBoss of America |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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