Correlation Between Microsoft and Advanced Info

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

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

Diversification Opportunities for Microsoft and Advanced Info

0.19

Correlation Coefficient

Microsoft  Advanced Info

Average diversification

The 3 months correlation between Microsoft and Advanced is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Advanced Info Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Info Service 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 Advanced Info. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Info Service has no effect on the direction of Microsoft i.e., Microsoft and Advanced Info go up and down completely randomly.

Pair Corralation between Microsoft and Advanced Info

Given the investment horizon of 90 days Microsoft is expected to generate 3.53 times less return on investment than Advanced Info. But when comparing it to its historical volatility, Microsoft is 1.76 times less risky than Advanced Info. It trades about 0.05 of its potential returns per unit of risk. Advanced Info Service is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Advanced Info Service on September 15, 2024 and sell it today you would earn a total of  105.00  from holding Advanced Info Service or generate 15.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

Microsoft  vs.  Advanced Info Service

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Advanced Info Service

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Advanced Info reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Advanced Info

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

The idea behind Microsoft and Advanced Info Service 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..