Correlation Between Microsoft and Acco Brands

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

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

Diversification Opportunities for Microsoft and Acco Brands

-0.05

Correlation Coefficient

Microsoft  Acco Brands

Good diversification

The 3 months correlation between Microsoft and Acco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands 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 Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of Microsoft i.e., Microsoft and Acco Brands go up and down completely randomly.

Pair Corralation between Microsoft and Acco Brands

Given the investment horizon of 90 days Microsoft is expected to under-perform the Acco Brands. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.69 times less risky than Acco Brands. The stock trades about -0.01 of its potential returns per unit of risk. The Acco Brands is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  494.00  in Acco Brands on August 26, 2024 and sell it today you would earn a total of  88.00  from holding Acco Brands or generate 17.81% return on investment over 90 days.

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

Microsoft  vs.  Acco Brands

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Acco Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Acco Brands are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Acco Brands may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Microsoft and Acco Brands

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

The idea behind Microsoft and Acco Brands 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.