Correlation Between Microsoft and Compania
Can any of the company-specific risk be diversified away by investing in both Microsoft and Compania 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 Compania into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Compania de Transporte, you can compare the effects of market volatilities on Microsoft and Compania 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 Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Compania.
Diversification Opportunities for Microsoft and Compania
Pay attention - limited upside
The 3 months correlation between Microsoft and Compania is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Microsoft i.e., Microsoft and Compania go up and down completely randomly.
Pair Corralation between Microsoft and Compania
Assuming the 90 days trading horizon Microsoft is expected to generate 2.3 times less return on investment than Compania. But when comparing it to its historical volatility, Microsoft is 1.31 times less risky than Compania. It trades about 0.06 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 112,850 in Compania de Transporte on September 12, 2024 and sell it today you would earn a total of 126,150 from holding Compania de Transporte or generate 111.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Compania de Transporte
Performance |
| Timeline |
| Microsoft |
| Compania de Transporte |
Microsoft and Compania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Compania
The main advantage of trading using opposite Microsoft and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.| Microsoft vs. Compania de Transporte | Microsoft vs. Transportadora de Gas | Microsoft vs. United States Steel | Microsoft vs. Telecom Argentina |
| Compania vs. Edesa Holding SA | Compania vs. Vista Energy, SAB | Compania vs. United States Steel | Compania vs. Pfizer Inc |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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