Correlation Between Microsoft and Azimut Exploration
Can any of the company-specific risk be diversified away by investing in both Microsoft and Azimut Exploration 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 Azimut Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Azimut Exploration, you can compare the effects of market volatilities on Microsoft and Azimut Exploration 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 Azimut Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Azimut Exploration.
Diversification Opportunities for Microsoft and Azimut Exploration
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Azimut is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Azimut Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azimut Exploration 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 Azimut Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azimut Exploration has no effect on the direction of Microsoft i.e., Microsoft and Azimut Exploration go up and down completely randomly.
Pair Corralation between Microsoft and Azimut Exploration
Given the investment horizon of 90 days Microsoft is expected to generate 0.5 times more return on investment than Azimut Exploration. However, Microsoft is 2.0 times less risky than Azimut Exploration. It trades about -0.33 of its potential returns per unit of risk. Azimut Exploration is currently generating about -0.17 per unit of risk. If you would invest 44,631 in Microsoft on November 29, 2024 and sell it today you would lose (4,658) from holding Microsoft or give up 10.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Azimut Exploration
Performance |
| Timeline |
| Microsoft |
| Azimut Exploration |
Microsoft and Azimut Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Azimut Exploration
The main advantage of trading using opposite Microsoft and Azimut Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Azimut Exploration 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 Azimut Exploration will offset losses from the drop in Azimut Exploration's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Azimut Exploration vs. Midland Exploration | Azimut Exploration vs. Sirios Resources | Azimut Exploration vs. Strategic Metals | Azimut Exploration vs. Waseco Resources |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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