Correlation Between Microsoft and Aethir
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aethir 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 Aethir into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aethir, you can compare the effects of market volatilities on Microsoft and Aethir 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 Aethir. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aethir.
Diversification Opportunities for Microsoft and Aethir
Very weak diversification
The 3 months correlation between Microsoft and Aethir is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aethir in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aethir 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 Aethir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aethir has no effect on the direction of Microsoft i.e., Microsoft and Aethir go up and down completely randomly.
Pair Corralation between Microsoft and Aethir
Given the investment horizon of 90 days Microsoft is expected to generate 15.52 times less return on investment than Aethir. But when comparing it to its historical volatility, Microsoft is 30.55 times less risky than Aethir. It trades about 0.09 of its potential returns per unit of risk. Aethir is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Aethir on August 30, 2024 and sell it today you would earn a total of 6.45 from holding Aethir or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.5% |
| Values | Daily Returns |
Microsoft vs. Aethir
Performance |
| Timeline |
| Microsoft |
| Aethir |
Microsoft and Aethir Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aethir
The main advantage of trading using opposite Microsoft and Aethir positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aethir 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 Aethir will offset losses from the drop in Aethir's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Stocks Directory Find actively traded stocks across global markets | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |