Correlation Between Microsoft and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ambev 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 Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ambev SA, you can compare the effects of market volatilities on Microsoft and Ambev 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 Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ambev SA.
Diversification Opportunities for Microsoft and Ambev SA
Excellent diversification
The 3 months correlation between Microsoft and Ambev is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Microsoft i.e., Microsoft and Ambev SA go up and down completely randomly.
Pair Corralation between Microsoft and Ambev SA
Assuming the 90 days trading horizon Microsoft is expected to under-perform the Ambev SA. In addition to that, Microsoft is 1.54 times more volatile than Ambev SA. It trades about -0.04 of its total potential returns per unit of risk. Ambev SA is currently generating about -0.02 per unit of volatility. If you would invest 1,275 in Ambev SA on August 26, 2024 and sell it today you would lose (7.00) from holding Ambev SA or give up 0.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Ambev SA
Performance |
| Timeline |
| Microsoft |
| Ambev SA |
Microsoft and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ambev SA
The main advantage of trading using opposite Microsoft and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ambev 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 Ambev SA will offset losses from the drop in Ambev SA's long position.| Microsoft vs. Align Technology | Microsoft vs. Hospital Mater Dei | Microsoft vs. Planet Fitness | Microsoft vs. Charter Communications |
| Ambev SA vs. Minerva SA | Ambev SA vs. BRF SA | Ambev SA vs. Companhia Siderrgica Nacional | Ambev SA vs. Cyrela Brazil Realty |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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