Correlation Between Microsoft and Betashares Asia
Can any of the company-specific risk be diversified away by investing in both Microsoft and Betashares Asia 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 Betashares Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Betashares Asia Technology, you can compare the effects of market volatilities on Microsoft and Betashares Asia 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 Betashares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Betashares Asia.
Diversification Opportunities for Microsoft and Betashares Asia
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Betashares is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Betashares Asia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Asia Tech 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 Betashares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Asia Tech has no effect on the direction of Microsoft i.e., Microsoft and Betashares Asia go up and down completely randomly.
Pair Corralation between Microsoft and Betashares Asia
Given the investment horizon of 90 days Microsoft is expected to generate 3.41 times less return on investment than Betashares Asia. But when comparing it to its historical volatility, Microsoft is 1.11 times less risky than Betashares Asia. It trades about 0.04 of its potential returns per unit of risk. Betashares Asia Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 870.00 in Betashares Asia Technology on August 29, 2024 and sell it today you would earn a total of 91.00 from holding Betashares Asia Technology or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Betashares Asia Technology
Performance |
| Timeline |
| Microsoft |
| Betashares Asia Tech |
Microsoft and Betashares Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Betashares Asia
The main advantage of trading using opposite Microsoft and Betashares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Betashares Asia 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 Betashares Asia will offset losses from the drop in Betashares Asia's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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