Correlation Between Microsoft and Agricultural Bank
Can any of the company-specific risk be diversified away by investing in both Microsoft and Agricultural Bank 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 Agricultural Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Agricultural Bank of, you can compare the effects of market volatilities on Microsoft and Agricultural Bank 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 Agricultural Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Agricultural Bank.
Diversification Opportunities for Microsoft and Agricultural Bank
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Agricultural is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Agricultural Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank 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 Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of Microsoft i.e., Microsoft and Agricultural Bank go up and down completely randomly.
Pair Corralation between Microsoft and Agricultural Bank
Given the investment horizon of 90 days Microsoft is expected to under-perform the Agricultural Bank. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.41 times less risky than Agricultural Bank. The stock trades about -0.24 of its potential returns per unit of risk. The Agricultural Bank of is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,032 in Agricultural Bank of on January 20, 2024 and sell it today you would earn a total of 61.00 from holding Agricultural Bank of or generate 5.91% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Microsoft vs. Agricultural Bank of
Performance |
Timeline |
Microsoft |
Agricultural Bank |
Microsoft and Agricultural Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Agricultural Bank
The main advantage of trading using opposite Microsoft and Agricultural Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Agricultural Bank 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 Agricultural Bank will offset losses from the drop in Agricultural Bank's long position.Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
Agricultural Bank vs. ANZ Group Holdings | Agricultural Bank vs. Bank of America | Agricultural Bank vs. Bank of America | Agricultural Bank vs. Wells Fargo |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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