Correlation Between Microsoft and AXA SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and AXA 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 AXA SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AXA SA, you can compare the effects of market volatilities on Microsoft and AXA 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 AXA SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AXA SA.
Diversification Opportunities for Microsoft and AXA SA
Good diversification
The 3 months correlation between Microsoft and AXA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA 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 AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Microsoft i.e., Microsoft and AXA SA go up and down completely randomly.
Pair Corralation between Microsoft and AXA SA
Given the investment horizon of 90 days Microsoft is expected to generate 1.19 times more return on investment than AXA SA. However, Microsoft is 1.19 times more volatile than AXA SA. It trades about 0.05 of its potential returns per unit of risk. AXA SA is currently generating about -0.08 per unit of risk. If you would invest 42,375 in Microsoft on September 23, 2024 and sell it today you would earn a total of 1,285 from holding Microsoft or generate 3.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 97.73% |
Values | Daily Returns |
Microsoft vs. AXA SA
Performance |
Timeline |
Microsoft |
AXA SA |
Microsoft and AXA SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and AXA SA
The main advantage of trading using opposite Microsoft and AXA SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AXA 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 AXA SA will offset losses from the drop in AXA SA'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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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