Correlation Between Microsoft and Ashmore Group

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

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

Diversification Opportunities for Microsoft and Ashmore Group

0.12

Correlation Coefficient

Microsoft  Ashmore Group

Average diversification

The 3 months correlation between Microsoft and Ashmore is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ashmore Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Group Plc 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 Ashmore Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Group Plc has no effect on the direction of Microsoft i.e., Microsoft and Ashmore Group go up and down completely randomly.

Pair Corralation between Microsoft and Ashmore Group

If you would invest  41,718  in Microsoft on September 12, 2024 and sell it today you would earn a total of  2,615  from holding Microsoft or generate 6.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Ashmore Group Plc

Microsoft

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) 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.

Ashmore Group Plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ashmore Group Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ashmore Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Ashmore Group

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

The idea behind Microsoft and Ashmore Group Plc 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 Anywhere module to track or share privately all of your investments from the convenience of any device.