Correlation Between Microsoft and Asset Five
Can any of the company-specific risk be diversified away by investing in both Microsoft and Asset Five 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 Asset Five into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Asset Five Group, you can compare the effects of market volatilities on Microsoft and Asset Five 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 Asset Five. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Asset Five.
Diversification Opportunities for Microsoft and Asset Five
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Asset is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Asset Five Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asset Five Group 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 Asset Five. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asset Five Group has no effect on the direction of Microsoft i.e., Microsoft and Asset Five go up and down completely randomly.
Pair Corralation between Microsoft and Asset Five
Given the investment horizon of 90 days Microsoft is expected to generate 0.75 times more return on investment than Asset Five. However, Microsoft is 1.33 times less risky than Asset Five. It trades about 0.16 of its potential returns per unit of risk. Asset Five Group is currently generating about -0.19 per unit of risk. If you would invest 41,879 in Microsoft on September 24, 2024 and sell it today you would earn a total of 1,646 from holding Microsoft or generate 3.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 90.48% |
Values | Daily Returns |
Microsoft vs. Asset Five Group
Performance |
Timeline |
Microsoft |
Asset Five Group |
Microsoft and Asset Five Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Asset Five
The main advantage of trading using opposite Microsoft and Asset Five positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Asset Five 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 Asset Five will offset losses from the drop in Asset Five's long position.Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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