Correlation Between Microsoft and Engie Brasil
Can any of the company-specific risk be diversified away by investing in both Microsoft and Engie Brasil 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 Engie Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Engie Brasil Energia, you can compare the effects of market volatilities on Microsoft and Engie Brasil 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 Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Engie Brasil.
Diversification Opportunities for Microsoft and Engie Brasil
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Engie is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia 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 Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of Microsoft i.e., Microsoft and Engie Brasil go up and down completely randomly.
Pair Corralation between Microsoft and Engie Brasil
Given the investment horizon of 90 days Microsoft is expected to generate 0.6 times more return on investment than Engie Brasil. However, Microsoft is 1.68 times less risky than Engie Brasil. It trades about -0.04 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about -0.12 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Engie Brasil Energia
Performance |
| Timeline |
| Microsoft |
| Engie Brasil Energia |
Microsoft and Engie Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Engie Brasil
The main advantage of trading using opposite Microsoft and Engie Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Engie Brasil 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 Engie Brasil will offset losses from the drop in Engie Brasil's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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