Correlation Between Microsoft and Aberdeen China
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aberdeen China 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 China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aberdeen China Oppty, you can compare the effects of market volatilities on Microsoft and Aberdeen China 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 China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aberdeen China.
Diversification Opportunities for Microsoft and Aberdeen China
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Aberdeen is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aberdeen China Oppty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen China Oppty 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 China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen China Oppty has no effect on the direction of Microsoft i.e., Microsoft and Aberdeen China go up and down completely randomly.
Pair Corralation between Microsoft and Aberdeen China
Given the investment horizon of 90 days Microsoft is expected to generate 2.56 times less return on investment than Aberdeen China. But when comparing it to its historical volatility, Microsoft is 1.43 times less risky than Aberdeen China. It trades about 0.02 of its potential returns per unit of risk. Aberdeen China Oppty is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,880 in Aberdeen China Oppty on September 1, 2024 and sell it today you would earn a total of 150.00 from holding Aberdeen China Oppty or generate 7.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Microsoft vs. Aberdeen China Oppty
Performance |
| Timeline |
| Microsoft |
| Aberdeen China Oppty |
Microsoft and Aberdeen China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aberdeen China
The main advantage of trading using opposite Microsoft and Aberdeen China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aberdeen China 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 China will offset losses from the drop in Aberdeen China's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Aberdeen China vs. Aberdeen Emerging Markets | Aberdeen China vs. Aberdeen Emerging Markets | Aberdeen China vs. Aberdeen Emerging Markets | Aberdeen China vs. Aberdeen Gbl Eq |
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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