Correlation Between Microsoft and Invesco Active
Can any of the company-specific risk be diversified away by investing in both Microsoft and Invesco Active 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 Invesco Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Invesco Active Real, you can compare the effects of market volatilities on Microsoft and Invesco Active 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 Invesco Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Invesco Active.
Diversification Opportunities for Microsoft and Invesco Active
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Invesco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Invesco Active Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Active Real 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 Invesco Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Active Real has no effect on the direction of Microsoft i.e., Microsoft and Invesco Active go up and down completely randomly.
Pair Corralation between Microsoft and Invesco Active
Given the investment horizon of 90 days Microsoft is expected to under-perform the Invesco Active. In addition to that, Microsoft is 1.83 times more volatile than Invesco Active Real. It trades about -0.04 of its total potential returns per unit of risk. Invesco Active Real is currently generating about 0.13 per unit of volatility. If you would invest 9,692 in Invesco Active Real on August 31, 2024 and sell it today you would earn a total of 263.00 from holding Invesco Active Real or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Invesco Active Real
Performance |
| Timeline |
| Microsoft |
| Invesco Active Real |
Microsoft and Invesco Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Invesco Active
The main advantage of trading using opposite Microsoft and Invesco Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Invesco Active 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 Invesco Active will offset losses from the drop in Invesco Active'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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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