Correlation Between Associated British and Microsoft
Can any of the company-specific risk be diversified away by investing in both Associated British and Microsoft 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 Associated British and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Microsoft, you can compare the effects of market volatilities on Associated British and Microsoft 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 Associated British with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Microsoft.
Diversification Opportunities for Associated British and Microsoft
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Associated and Microsoft is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Associated British 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 Associated British Foods are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Associated British i.e., Associated British and Microsoft go up and down completely randomly.
Pair Corralation between Associated British and Microsoft
Assuming the 90 days horizon Associated British Foods is expected to generate 1.45 times more return on investment than Microsoft. However, Associated British is 1.45 times more volatile than Microsoft. It trades about -0.02 of its potential returns per unit of risk. Microsoft is currently generating about -0.36 per unit of risk. If you would invest 3,066 in Associated British Foods on January 21, 2024 and sell it today you would lose (22.00) from holding Associated British Foods or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Associated British Foods vs. Microsoft
Performance |
| Timeline |
| Associated British Foods |
| Microsoft |
Associated British and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Microsoft
The main advantage of trading using opposite Associated British and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Associated British vs. Kellanova | Associated British vs. Lancaster Colony | Associated British vs. The A2 Milk | Associated British vs. Artisan Consumer Goods |
| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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