Correlation Between Microsoft and Astec Industries
Can any of the company-specific risk be diversified away by investing in both Microsoft and Astec Industries 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 Astec Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Astec Industries, you can compare the effects of market volatilities on Microsoft and Astec Industries 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 Astec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Astec Industries.
Diversification Opportunities for Microsoft and Astec Industries
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Astec is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries 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 Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of Microsoft i.e., Microsoft and Astec Industries go up and down completely randomly.
Pair Corralation between Microsoft and Astec Industries
Given the investment horizon of 90 days Microsoft is expected to under-perform the Astec Industries. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.08 times less risky than Astec Industries. The stock trades about -0.04 of its potential returns per unit of risk. The Astec Industries is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 3,172 in Astec Industries on August 28, 2024 and sell it today you would earn a total of 717.00 from holding Astec Industries or generate 22.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Astec Industries
Performance |
| Timeline |
| Microsoft |
| Astec Industries |
Microsoft and Astec Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Astec Industries
The main advantage of trading using opposite Microsoft and Astec Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Astec Industries 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 Astec Industries will offset losses from the drop in Astec Industries' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Astec Industries vs. Hyster Yale Materials Handling | Astec Industries vs. Manitex International | Astec Industries vs. Shyft Group | Astec Industries vs. Rev 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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