Correlation Between Microsoft and Aeroports
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aeroports 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 Aeroports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aeroports de Paris, you can compare the effects of market volatilities on Microsoft and Aeroports 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 Aeroports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aeroports.
Diversification Opportunities for Microsoft and Aeroports
Good diversification
The 3 months correlation between Microsoft and Aeroports is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris 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 Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Microsoft i.e., Microsoft and Aeroports go up and down completely randomly.
Pair Corralation between Microsoft and Aeroports
Given the investment horizon of 90 days Microsoft is expected to under-perform the Aeroports. In addition to that, Microsoft is 4.81 times more volatile than Aeroports de Paris. It trades about -0.04 of its total potential returns per unit of risk. Aeroports de Paris is currently generating about 0.21 per unit of volatility. If you would invest 1,155 in Aeroports de Paris on August 25, 2024 and sell it today you would earn a total of 19.00 from holding Aeroports de Paris or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Aeroports de Paris
Performance |
| Timeline |
| Microsoft |
| Aeroports de Paris |
Microsoft and Aeroports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aeroports
The main advantage of trading using opposite Microsoft and Aeroports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aeroports 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 Aeroports will offset losses from the drop in Aeroports' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Aeroports vs. Japan Airport Terminal | Aeroports vs. Aena SME SA | Aeroports vs. Airports of Thailand | Aeroports vs. Aena SME SA |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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