Correlation Between Microsoft and Avax Techs
Can any of the company-specific risk be diversified away by investing in both Microsoft and Avax Techs 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 Avax Techs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Avax Techs, you can compare the effects of market volatilities on Microsoft and Avax Techs 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 Avax Techs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Avax Techs.
Diversification Opportunities for Microsoft and Avax Techs
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Avax is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Avax Techs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avax Techs 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 Avax Techs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avax Techs has no effect on the direction of Microsoft i.e., Microsoft and Avax Techs go up and down completely randomly.
Pair Corralation between Microsoft and Avax Techs
Given the investment horizon of 90 days Microsoft is expected to generate 0.08 times more return on investment than Avax Techs. However, Microsoft is 12.7 times less risky than Avax Techs. It trades about 0.0 of its potential returns per unit of risk. Avax Techs is currently generating about -0.22 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would lose (188.00) from holding Microsoft or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Microsoft vs. Avax Techs
Performance |
| Timeline |
| Microsoft |
| Avax Techs |
Microsoft and Avax Techs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Avax Techs
The main advantage of trading using opposite Microsoft and Avax Techs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Avax Techs 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 Avax Techs will offset losses from the drop in Avax Techs' 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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