Correlation Between Microsoft and American Beacon
Can any of the company-specific risk be diversified away by investing in both Microsoft and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and American Beacon Shapiro, you can compare the effects of market volatilities on Microsoft and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and American Beacon.
Diversification Opportunities for Microsoft and American Beacon
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and American is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and American Beacon Shapiro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Shapiro 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Shapiro has no effect on the direction of Microsoft i.e., Microsoft and American Beacon go up and down completely randomly.
Pair Corralation between Microsoft and American Beacon
Given the investment horizon of 90 days Microsoft is expected to generate 1.71 times more return on investment than American Beacon. However, Microsoft is 1.71 times more volatile than American Beacon Shapiro. It trades about 0.32 of its potential returns per unit of risk. American Beacon Shapiro is currently generating about -0.09 per unit of risk. If you would invest 42,218 in Microsoft on September 13, 2024 and sell it today you would earn a total of 3,249 from holding Microsoft or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. American Beacon Shapiro
Performance |
| Timeline |
| Microsoft |
| American Beacon Shapiro |
Microsoft and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and American Beacon
The main advantage of trading using opposite Microsoft and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| American Beacon vs. American Beacon Ssi | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Twentyfour |
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.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |