Correlation Between Microsoft and Advanced Container
Can any of the company-specific risk be diversified away by investing in both Microsoft and Advanced Container 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 Advanced Container into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Advanced Container Technologies, you can compare the effects of market volatilities on Microsoft and Advanced Container 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 Advanced Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Advanced Container.
Diversification Opportunities for Microsoft and Advanced Container
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Advanced is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Advanced Container Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Container 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 Advanced Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Container has no effect on the direction of Microsoft i.e., Microsoft and Advanced Container go up and down completely randomly.
Pair Corralation between Microsoft and Advanced Container
Given the investment horizon of 90 days Microsoft is expected to under-perform the Advanced Container. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 7.64 times less risky than Advanced Container. The stock trades about -0.01 of its potential returns per unit of risk. The Advanced Container Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Advanced Container Technologies on September 25, 2024 and sell it today you would earn a total of 0.00 from holding Advanced Container Technologies or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Advanced Container Technologie
Performance |
Timeline |
Microsoft |
Advanced Container |
Microsoft and Advanced Container Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Advanced Container
The main advantage of trading using opposite Microsoft and Advanced Container positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Advanced Container 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 Advanced Container will offset losses from the drop in Advanced Container'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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