Correlation Between Amdocs and Microsoft

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Can any of the company-specific risk be diversified away by investing in both Amdocs 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 Amdocs and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amdocs and Microsoft, you can compare the effects of market volatilities on Amdocs 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 Amdocs with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amdocs and Microsoft.

Diversification Opportunities for Amdocs and Microsoft

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Amdocs and Microsoft is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Amdocs and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Amdocs 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 Amdocs 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 Amdocs i.e., Amdocs and Microsoft go up and down completely randomly.

Pair Corralation between Amdocs and Microsoft

Considering the 90-day investment horizon Amdocs is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, Amdocs is 1.26 times less risky than Microsoft. The stock trades about -0.04 of its potential returns per unit of risk. The Microsoft is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  40,748  in Microsoft on December 29, 2023 and sell it today you would earn a total of  1,324  from holding Microsoft or generate 3.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Amdocs  vs.  Microsoft

 Performance 
       Timeline  
Amdocs 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Amdocs are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Amdocs is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Microsoft 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Amdocs and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amdocs and Microsoft

The main advantage of trading using opposite Amdocs and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amdocs 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.
The idea behind Amdocs and Microsoft 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.
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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