Correlation Between Microsoft and Ashmore Emerging
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ashmore Emerging 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 Ashmore Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ashmore Emerging Markets, you can compare the effects of market volatilities on Microsoft and Ashmore Emerging 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 Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ashmore Emerging.
Diversification Opportunities for Microsoft and Ashmore Emerging
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Ashmore is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ashmore Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Emerging Markets 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 Ashmore Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Emerging Markets has no effect on the direction of Microsoft i.e., Microsoft and Ashmore Emerging go up and down completely randomly.
Pair Corralation between Microsoft and Ashmore Emerging
Given the investment horizon of 90 days Microsoft is expected to generate 2.78 times more return on investment than Ashmore Emerging. However, Microsoft is 2.78 times more volatile than Ashmore Emerging Markets. It trades about -0.06 of its potential returns per unit of risk. Ashmore Emerging Markets is currently generating about -0.28 per unit of risk. If you would invest 42,729 in Microsoft on August 26, 2024 and sell it today you would lose (1,029) from holding Microsoft or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Ashmore Emerging Markets
Performance |
| Timeline |
| Microsoft |
| Ashmore Emerging Markets |
Microsoft and Ashmore Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ashmore Emerging
The main advantage of trading using opposite Microsoft and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ashmore Emerging 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 Ashmore Emerging will offset losses from the drop in Ashmore Emerging's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Ashmore Emerging vs. Ashmore Emerging Markets | Ashmore Emerging vs. Ashmore Emerging Markets | Ashmore Emerging vs. Ashmore Emerging Markets | Ashmore Emerging vs. Ashmore Emerging Markets |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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