Correlation Between Microsoft and Columbia Acorn
Can any of the company-specific risk be diversified away by investing in both Microsoft and Columbia Acorn 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 Columbia Acorn into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Columbia Acorn European, you can compare the effects of market volatilities on Microsoft and Columbia Acorn 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 Columbia Acorn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Columbia Acorn.
Diversification Opportunities for Microsoft and Columbia Acorn
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Columbia is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Columbia Acorn European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Acorn European 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 Columbia Acorn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Acorn European has no effect on the direction of Microsoft i.e., Microsoft and Columbia Acorn go up and down completely randomly.
Pair Corralation between Microsoft and Columbia Acorn
Given the investment horizon of 90 days Microsoft is expected to generate 1.22 times more return on investment than Columbia Acorn. However, Microsoft is 1.22 times more volatile than Columbia Acorn European. It trades about 0.19 of its potential returns per unit of risk. Columbia Acorn European is currently generating about -0.09 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Columbia Acorn European
Performance |
| Timeline |
| Microsoft |
| Columbia Acorn European |
Microsoft and Columbia Acorn Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Columbia Acorn
The main advantage of trading using opposite Microsoft and Columbia Acorn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Columbia Acorn 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 Columbia Acorn will offset losses from the drop in Columbia Acorn's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Columbia Acorn vs. Morgan Stanley European | Columbia Acorn vs. Columbia Emerging Markets | Columbia Acorn vs. Columbia Mortgage Opportunities | Columbia Acorn vs. Columbia Small Cap |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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