Correlation Between Microsoft and Allos SA

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

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

Diversification Opportunities for Microsoft and Allos SA

-0.48

Correlation Coefficient

Microsoft  Allos SA

Very good diversification

The 3 months correlation between Microsoft and Allos is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Allos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allos SA 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 Allos SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allos SA has no effect on the direction of Microsoft i.e., Microsoft and Allos SA go up and down completely randomly.

Pair Corralation between Microsoft and Allos SA

Given the investment horizon of 90 days Microsoft is expected to under-perform the Allos SA. In addition to that, Microsoft is 1.01 times more volatile than Allos SA. It trades about -0.08 of its total potential returns per unit of risk. Allos SA is currently generating about 0.1 per unit of volatility. If you would invest  1,784  in Allos SA on December 28, 2024 and sell it today you would earn a total of  164.00  from holding Allos SA or generate 9.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Allos SA

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Allos SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allos SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Allos SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and Allos SA

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

The idea behind Microsoft and Allos SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.