Correlation Between Microsoft and Aberdeen Emerging
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aberdeen 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 Aberdeen Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aberdeen Emerging Markets, you can compare the effects of market volatilities on Microsoft and Aberdeen 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 Aberdeen Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aberdeen Emerging.
Diversification Opportunities for Microsoft and Aberdeen Emerging
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Aberdeen is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aberdeen Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen 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 Aberdeen Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Emerging Markets has no effect on the direction of Microsoft i.e., Microsoft and Aberdeen Emerging go up and down completely randomly.
Pair Corralation between Microsoft and Aberdeen Emerging
Given the investment horizon of 90 days Microsoft is expected to generate 1.96 times more return on investment than Aberdeen Emerging. However, Microsoft is 1.96 times more volatile than Aberdeen Emerging Markets. It trades about -0.01 of its potential returns per unit of risk. Aberdeen Emerging Markets is currently generating about -0.2 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would lose (275.00) from holding Microsoft or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Aberdeen Emerging Markets
Performance |
| Timeline |
| Microsoft |
| Aberdeen Emerging Markets |
Microsoft and Aberdeen Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aberdeen Emerging
The main advantage of trading using opposite Microsoft and Aberdeen Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aberdeen 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 Aberdeen Emerging will offset losses from the drop in Aberdeen Emerging's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Aberdeen Emerging vs. T Rowe Price | Aberdeen Emerging vs. Pace Large Growth | Aberdeen Emerging vs. Upright Assets Allocation | Aberdeen Emerging vs. Dodge Cox Stock |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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