Correlation Between Microsoft and Aboitiz Equity

Can any of the company-specific risk be diversified away by investing in both Microsoft and Aboitiz Equity 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 Aboitiz Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Aboitiz Equity Ventures, you can compare the effects of market volatilities on Microsoft and Aboitiz Equity 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 Aboitiz Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aboitiz Equity.

Diversification Opportunities for Microsoft and Aboitiz Equity

-0.46

Correlation Coefficient

Microsoft  Aboitiz Equity

Very good diversification

The 3 months correlation between Microsoft and Aboitiz is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aboitiz Equity Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aboitiz Equity Ventures 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 Aboitiz Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aboitiz Equity Ventures has no effect on the direction of Microsoft i.e., Microsoft and Aboitiz Equity go up and down completely randomly.

Pair Corralation between Microsoft and Aboitiz Equity

Given the investment horizon of 90 days Microsoft is expected to generate 0.67 times more return on investment than Aboitiz Equity. However, Microsoft is 1.5 times less risky than Aboitiz Equity. It trades about 0.09 of its potential returns per unit of risk. Aboitiz Equity Ventures is currently generating about -0.04 per unit of risk. If you would invest  23,866  in Microsoft on October 12, 2024 and sell it today you would earn a total of  18,590  from holding Microsoft or generate 77.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Microsoft  vs.  Aboitiz Equity Ventures

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aboitiz Equity Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aboitiz Equity Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Microsoft and Aboitiz Equity

The main advantage of trading using opposite Microsoft and Aboitiz Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aboitiz Equity 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 Aboitiz Equity will offset losses from the drop in Aboitiz Equity's long position.

The idea behind Microsoft and Aboitiz Equity Ventures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.