Correlation Between Microsoft and Anchor Risk
Can any of the company-specific risk be diversified away by investing in both Microsoft and Anchor Risk 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 Anchor Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Anchor Risk Managed, you can compare the effects of market volatilities on Microsoft and Anchor Risk 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 Anchor Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Anchor Risk.
Diversification Opportunities for Microsoft and Anchor Risk
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Anchor is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Anchor Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anchor Risk Managed 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 Anchor Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anchor Risk Managed has no effect on the direction of Microsoft i.e., Microsoft and Anchor Risk go up and down completely randomly.
Pair Corralation between Microsoft and Anchor Risk
Given the investment horizon of 90 days Microsoft is expected to generate 3.37 times more return on investment than Anchor Risk. However, Microsoft is 3.37 times more volatile than Anchor Risk Managed. It trades about 0.08 of its potential returns per unit of risk. Anchor Risk Managed is currently generating about 0.03 per unit of risk. If you would invest 24,616 in Microsoft on August 26, 2024 and sell it today you would earn a total of 17,084 from holding Microsoft or generate 69.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Anchor Risk Managed
Performance |
| Timeline |
| Microsoft |
| Anchor Risk Managed |
Microsoft and Anchor Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Anchor Risk
The main advantage of trading using opposite Microsoft and Anchor Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Anchor Risk 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 Anchor Risk will offset losses from the drop in Anchor Risk's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Anchor Risk vs. Anchor Risk Managed | Anchor Risk vs. Anchor Tactical Credit | Anchor Risk vs. Anchor Tactical Equity |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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