Correlation Between Microsoft and Gafisa SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Gafisa SA 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 Gafisa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Gafisa SA, you can compare the effects of market volatilities on Microsoft and Gafisa SA 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 Gafisa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Gafisa SA.
Diversification Opportunities for Microsoft and Gafisa SA
Good diversification
The 3 months correlation between Microsoft and Gafisa is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA 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 Gafisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gafisa SA has no effect on the direction of Microsoft i.e., Microsoft and Gafisa SA go up and down completely randomly.
Pair Corralation between Microsoft and Gafisa SA
Given the investment horizon of 90 days Microsoft is expected to generate 0.2 times more return on investment than Gafisa SA. However, Microsoft is 4.96 times less risky than Gafisa SA. It trades about 0.04 of its potential returns per unit of risk. Gafisa SA is currently generating about -0.06 per unit of risk. If you would invest 37,173 in Microsoft on August 27, 2024 and sell it today you would earn a total of 4,527 from holding Microsoft or generate 12.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Microsoft vs. Gafisa SA
Performance |
| Timeline |
| Microsoft |
| Gafisa SA |
Microsoft and Gafisa SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Gafisa SA
The main advantage of trading using opposite Microsoft and Gafisa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Gafisa SA 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 Gafisa SA will offset losses from the drop in Gafisa SA's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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