Correlation Between Microsoft and AXA World

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

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

Diversification Opportunities for Microsoft and AXA World

-0.54

Correlation Coefficient

Microsoft  AXA World

Excellent diversification

The 3 months correlation between Microsoft and AXA is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AXA World Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA World Funds 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 AXA World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA World Funds has no effect on the direction of Microsoft i.e., Microsoft and AXA World go up and down completely randomly.

Pair Corralation between Microsoft and AXA World

Given the investment horizon of 90 days Microsoft is expected to under-perform the AXA World. In addition to that, Microsoft is 2.68 times more volatile than AXA World Funds. It trades about -0.11 of its total potential returns per unit of risk. AXA World Funds is currently generating about 0.11 per unit of volatility. If you would invest  20,638  in AXA World Funds on December 28, 2024 and sell it today you would earn a total of  874.00  from holding AXA World Funds or generate 4.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  AXA World Funds

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.

AXA World Funds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXA World Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, AXA World is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and AXA World

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

The idea behind Microsoft and AXA World Funds 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.