Correlation Between Microsoft and AMREP
Can any of the company-specific risk be diversified away by investing in both Microsoft and AMREP 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 AMREP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AMREP, you can compare the effects of market volatilities on Microsoft and AMREP 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 AMREP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AMREP.
Diversification Opportunities for Microsoft and AMREP
Average diversification
The 3 months correlation between Microsoft and AMREP is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AMREP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMREP 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 AMREP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMREP has no effect on the direction of Microsoft i.e., Microsoft and AMREP go up and down completely randomly.
Pair Corralation between Microsoft and AMREP
Given the investment horizon of 90 days Microsoft is expected to under-perform the AMREP. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.68 times less risky than AMREP. The stock trades about -0.04 of its potential returns per unit of risk. The AMREP is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,948 in AMREP on August 30, 2024 and sell it today you would earn a total of 592.00 from holding AMREP or generate 20.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. AMREP
Performance |
| Timeline |
| Microsoft |
| AMREP |
Microsoft and AMREP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AMREP
The main advantage of trading using opposite Microsoft and AMREP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AMREP 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 AMREP will offset losses from the drop in AMREP's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| AMREP vs. Landsea Homes Corp | AMREP vs. Forestar Group | AMREP vs. Five Point Holdings | AMREP vs. American Realty Investors |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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