Correlation Between Microsoft and Gerdau SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Gerdau 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 Gerdau SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Gerdau SA, you can compare the effects of market volatilities on Microsoft and Gerdau 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 Gerdau SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Gerdau SA.
Diversification Opportunities for Microsoft and Gerdau SA
Good diversification
The 3 months correlation between Microsoft and Gerdau is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau 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 Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA has no effect on the direction of Microsoft i.e., Microsoft and Gerdau SA go up and down completely randomly.
Pair Corralation between Microsoft and Gerdau SA
Given the investment horizon of 90 days Microsoft is expected to under-perform the Gerdau SA. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.47 times less risky than Gerdau SA. The stock trades about -0.04 of its potential returns per unit of risk. The Gerdau SA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,814 in Gerdau SA on August 31, 2024 and sell it today you would earn a total of 211.00 from holding Gerdau SA or generate 11.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Microsoft vs. Gerdau SA
Performance |
| Timeline |
| Microsoft |
| Gerdau SA |
Microsoft and Gerdau SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Gerdau SA
The main advantage of trading using opposite Microsoft and Gerdau SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Gerdau 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 Gerdau SA will offset losses from the drop in Gerdau SA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Gerdau SA vs. Companhia Siderrgica Nacional | Gerdau SA vs. Usinas Siderrgicas de | Gerdau SA vs. Companhia Energtica de | Gerdau SA vs. Cosan SA |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |