Correlation Between Microsoft and Abrdn Asia
Can any of the company-specific risk be diversified away by investing in both Microsoft and Abrdn Asia 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 Abrdn Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and abrdn Asia Pacific, you can compare the effects of market volatilities on Microsoft and Abrdn Asia 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 Abrdn Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Abrdn Asia.
Diversification Opportunities for Microsoft and Abrdn Asia
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Abrdn is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and abrdn Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on abrdn Asia Pacific 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 Abrdn Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of abrdn Asia Pacific has no effect on the direction of Microsoft i.e., Microsoft and Abrdn Asia go up and down completely randomly.
Pair Corralation between Microsoft and Abrdn Asia
Given the investment horizon of 90 days Microsoft is expected to generate 1.82 times more return on investment than Abrdn Asia. However, Microsoft is 1.82 times more volatile than abrdn Asia Pacific. It trades about 0.1 of its potential returns per unit of risk. abrdn Asia Pacific is currently generating about 0.06 per unit of risk. If you would invest 22,345 in Microsoft on August 31, 2024 and sell it today you would earn a total of 20,001 from holding Microsoft or generate 89.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Microsoft vs. abrdn Asia Pacific
Performance |
| Timeline |
| Microsoft |
| abrdn Asia Pacific |
Microsoft and Abrdn Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Abrdn Asia
The main advantage of trading using opposite Microsoft and Abrdn Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Abrdn Asia 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 Abrdn Asia will offset losses from the drop in Abrdn Asia's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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