Correlation Between Microsoft and So Carlos
Can any of the company-specific risk be diversified away by investing in both Microsoft and So Carlos 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 So Carlos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and So Carlos Empreendimentos, you can compare the effects of market volatilities on Microsoft and So Carlos 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 So Carlos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and So Carlos.
Diversification Opportunities for Microsoft and So Carlos
Good diversification
The 3 months correlation between Microsoft and SCAR3 is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and So Carlos Empreendimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Carlos Empreendimentos 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 So Carlos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Carlos Empreendimentos has no effect on the direction of Microsoft i.e., Microsoft and So Carlos go up and down completely randomly.
Pair Corralation between Microsoft and So Carlos
Assuming the 90 days trading horizon Microsoft is expected to under-perform the So Carlos. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.56 times less risky than So Carlos. The stock trades about -0.26 of its potential returns per unit of risk. The So Carlos Empreendimentos is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,621 in So Carlos Empreendimentos on November 27, 2024 and sell it today you would earn a total of 124.00 from holding So Carlos Empreendimentos or generate 7.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. So Carlos Empreendimentos
Performance |
| Timeline |
| Microsoft |
| So Carlos Empreendimentos |
Microsoft and So Carlos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and So Carlos
The main advantage of trading using opposite Microsoft and So Carlos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, So Carlos 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 So Carlos will offset losses from the drop in So Carlos' long position.| Microsoft vs. Patria Investments Limited | Microsoft vs. Metalurgica Gerdau SA | Microsoft vs. Clover Health Investments, | Microsoft vs. Melco Resorts Entertainment |
| So Carlos vs. EZTEC Empreendimentos e | So Carlos vs. PBG SA | So Carlos vs. LPS Brasil | So Carlos vs. Tecnisa 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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