Correlation Between Microsoft and Telecom Argentina
Can any of the company-specific risk be diversified away by investing in both Microsoft and Telecom Argentina 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 Telecom Argentina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Telecom Argentina, you can compare the effects of market volatilities on Microsoft and Telecom Argentina 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 Telecom Argentina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Telecom Argentina.
Diversification Opportunities for Microsoft and Telecom Argentina
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Telecom is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Telecom Argentina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina 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 Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of Microsoft i.e., Microsoft and Telecom Argentina go up and down completely randomly.
Pair Corralation between Microsoft and Telecom Argentina
Assuming the 90 days trading horizon Microsoft is expected to generate 1.82 times less return on investment than Telecom Argentina. But when comparing it to its historical volatility, Microsoft is 1.34 times less risky than Telecom Argentina. It trades about 0.07 of its potential returns per unit of risk. Telecom Argentina is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 149,500 in Telecom Argentina on August 26, 2024 and sell it today you would earn a total of 148,500 from holding Telecom Argentina or generate 99.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Telecom Argentina
Performance |
| Timeline |
| Microsoft |
| Telecom Argentina |
Microsoft and Telecom Argentina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Telecom Argentina
The main advantage of trading using opposite Microsoft and Telecom Argentina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Telecom Argentina 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 Telecom Argentina will offset losses from the drop in Telecom Argentina's long position.The idea behind Microsoft and Telecom Argentina 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.| Telecom Argentina vs. Grupo Televisa SAB | Telecom Argentina vs. United States Steel | Telecom Argentina vs. Pfizer Inc | Telecom Argentina vs. Distribuidora de Gas |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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