Correlation Between Microsoft and Companhia
Can any of the company-specific risk be diversified away by investing in both Microsoft and Companhia 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 Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Companhia de Saneamento, you can compare the effects of market volatilities on Microsoft and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Companhia.
Diversification Opportunities for Microsoft and Companhia
Significant diversification
The 3 months correlation between Microsoft and Companhia is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Microsoft i.e., Microsoft and Companhia go up and down completely randomly.
Pair Corralation between Microsoft and Companhia
Given the investment horizon of 90 days Microsoft is expected to generate 6.61 times less return on investment than Companhia. But when comparing it to its historical volatility, Microsoft is 1.31 times less risky than Companhia. It trades about 0.02 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7,355 in Companhia de Saneamento on August 31, 2024 and sell it today you would earn a total of 1,943 from holding Companhia de Saneamento or generate 26.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Microsoft vs. Companhia de Saneamento
Performance |
| Timeline |
| Microsoft |
| Companhia de Saneamento |
Microsoft and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Companhia
The main advantage of trading using opposite Microsoft and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Companhia vs. CCR SA | Companhia vs. Centrais Eltricas Brasileiras | Companhia vs. Companhia Energtica de | Companhia vs. Centrais Eltricas Brasileiras |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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