Correlation Between Microsoft and Ab National

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

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

Diversification Opportunities for Microsoft and Ab National

0.13

Correlation Coefficient

Microsoft  Ab National

Average diversification

The 3 months correlation between Microsoft and ALTHX is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ab National Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab National Portfolio 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 Ab National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab National Portfolio has no effect on the direction of Microsoft i.e., Microsoft and Ab National go up and down completely randomly.

Pair Corralation between Microsoft and Ab National

Given the investment horizon of 90 days Microsoft is expected to generate 5.45 times more return on investment than Ab National. However, Microsoft is 5.45 times more volatile than Ab National Portfolio. It trades about 0.05 of its potential returns per unit of risk. Ab National Portfolio is currently generating about 0.04 per unit of risk. If you would invest  40,862  in Microsoft on August 31, 2024 and sell it today you would earn a total of  1,437  from holding Microsoft or generate 3.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Ab National Portfolio

Microsoft

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Ab National Portfolio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ab National Portfolio are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Ab National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Ab National

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

The idea behind Microsoft and Ab National Portfolio 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.