Correlation Between Microsoft and Aberdeen

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

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

Diversification Opportunities for Microsoft and Aberdeen

-0.41

Correlation Coefficient

Microsoft  Aberdeen

Very good diversification

The 3 months correlation between Microsoft and Aberdeen is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aberdeen Eq Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Eq Long 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 Aberdeen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Eq Long has no effect on the direction of Microsoft i.e., Microsoft and Aberdeen go up and down completely randomly.

Pair Corralation between Microsoft and Aberdeen

Given the investment horizon of 90 days Microsoft is expected to under-perform the Aberdeen. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 21.45 times less risky than Aberdeen. The stock trades about -0.1 of its potential returns per unit of risk. The Aberdeen Eq Long Short is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  907.00  in Aberdeen Eq Long Short on December 31, 2024 and sell it today you would earn a total of  2,047  from holding Aberdeen Eq Long Short or generate 225.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.74%
Values	Daily Returns

Microsoft  vs.  Aberdeen Eq Long Short

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.

Aberdeen Eq Long

Risk-Adjusted Performance

Good

Over the last 90 days Aberdeen Eq Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward indicators, Aberdeen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Aberdeen

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

The idea behind Microsoft and Aberdeen Eq Long Short 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.