Correlation Between Microsoft and WEG SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and WEG 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 WEG SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and WEG SA ADR, you can compare the effects of market volatilities on Microsoft and WEG 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 WEG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and WEG SA.
Diversification Opportunities for Microsoft and WEG SA
Modest diversification
The 3 months correlation between Microsoft and WEG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and WEG SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA ADR 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 WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA ADR has no effect on the direction of Microsoft i.e., Microsoft and WEG SA go up and down completely randomly.
Pair Corralation between Microsoft and WEG SA
Given the investment horizon of 90 days Microsoft is expected to generate 1.06 times more return on investment than WEG SA. However, Microsoft is 1.06 times more volatile than WEG SA ADR. It trades about -0.04 of its potential returns per unit of risk. WEG SA ADR is currently generating about -0.17 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. WEG SA ADR
Performance |
| Timeline |
| Microsoft |
| WEG SA ADR |
Microsoft and WEG SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and WEG SA
The main advantage of trading using opposite Microsoft and WEG SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, WEG 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 WEG SA will offset losses from the drop in WEG SA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| WEG SA vs. Nuburu Inc | WEG SA vs. Shapeways Holdings, Common | WEG SA vs. Smith AO | WEG SA vs. Crane Company |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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