Correlation Between Microsoft and AG Mortgage
Can any of the company-specific risk be diversified away by investing in both Microsoft and AG Mortgage 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 AG Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AG Mortgage Investment, you can compare the effects of market volatilities on Microsoft and AG Mortgage 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 AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AG Mortgage.
Diversification Opportunities for Microsoft and AG Mortgage
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and MITT-PA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of Microsoft i.e., Microsoft and AG Mortgage go up and down completely randomly.
Pair Corralation between Microsoft and AG Mortgage
Given the investment horizon of 90 days Microsoft is expected to under-perform the AG Mortgage. In addition to that, Microsoft is 1.09 times more volatile than AG Mortgage Investment. It trades about -0.07 of its total potential returns per unit of risk. AG Mortgage Investment is currently generating about -0.01 per unit of volatility. If you would invest 2,228 in AG Mortgage Investment on October 24, 2024 and sell it today you would lose (7.00) from holding AG Mortgage Investment or give up 0.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. AG Mortgage Investment
Performance |
| Timeline |
| Microsoft |
| AG Mortgage Investment |
Microsoft and AG Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AG Mortgage
The main advantage of trading using opposite Microsoft and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AG Mortgage 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 AG Mortgage will offset losses from the drop in AG Mortgage's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
| AG Mortgage vs. New York Mortgage | AG Mortgage vs. New York Mortgage | AG Mortgage vs. Two Harbors Investment | AG Mortgage vs. Two Harbors Investment |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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