Correlation Between Microsoft and Asia Opportunity
Can any of the company-specific risk be diversified away by investing in both Microsoft and Asia Opportunity 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 Asia Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Asia Opportunity Portfolio, you can compare the effects of market volatilities on Microsoft and Asia Opportunity 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 Asia Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Asia Opportunity.
Diversification Opportunities for Microsoft and Asia Opportunity
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Asia is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Asia Opportunity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Opportunity Por 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 Asia Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Opportunity Por has no effect on the direction of Microsoft i.e., Microsoft and Asia Opportunity go up and down completely randomly.
Pair Corralation between Microsoft and Asia Opportunity
Given the investment horizon of 90 days Microsoft is expected to generate 1.15 times more return on investment than Asia Opportunity. However, Microsoft is 1.15 times more volatile than Asia Opportunity Portfolio. It trades about 0.1 of its potential returns per unit of risk. Asia Opportunity Portfolio is currently generating about 0.03 per unit of risk. If you would invest 23,313 in Microsoft on September 16, 2024 and sell it today you would earn a total of 21,414 from holding Microsoft or generate 91.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Asia Opportunity Portfolio
Performance |
| Timeline |
| Microsoft |
| Asia Opportunity Por |
Microsoft and Asia Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Asia Opportunity
The main advantage of trading using opposite Microsoft and Asia Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Asia Opportunity 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 Asia Opportunity will offset losses from the drop in Asia Opportunity's long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| Asia Opportunity vs. Emerging Markets Equity | Asia Opportunity vs. Global Fixed Income | Asia Opportunity vs. Global Fixed Income | Asia Opportunity vs. Global Fixed Income |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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