Correlation Between Microsoft and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Microsoft and AstraZeneca PLC 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 AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AstraZeneca PLC, you can compare the effects of market volatilities on Microsoft and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AstraZeneca PLC.
Diversification Opportunities for Microsoft and AstraZeneca PLC
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and AstraZeneca is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Microsoft i.e., Microsoft and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Microsoft and AstraZeneca PLC
Given the investment horizon of 90 days Microsoft is expected to generate 0.62 times more return on investment than AstraZeneca PLC. However, Microsoft is 1.6 times less risky than AstraZeneca PLC. It trades about -0.04 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.2 per unit of risk. If you would invest 42,574 in Microsoft on August 27, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. AstraZeneca PLC
Performance |
| Timeline |
| Microsoft |
| AstraZeneca PLC |
Microsoft and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AstraZeneca PLC
The main advantage of trading using opposite Microsoft and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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