Correlation Between Porto Seguro and Microsoft
Can any of the company-specific risk be diversified away by investing in both Porto Seguro and Microsoft 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 Porto Seguro and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Porto Seguro SA and Microsoft, you can compare the effects of market volatilities on Porto Seguro and Microsoft 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 Porto Seguro with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porto Seguro and Microsoft.
Diversification Opportunities for Porto Seguro and Microsoft
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Porto and Microsoft is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Porto Seguro SA and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Porto Seguro 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 Porto Seguro SA are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Porto Seguro i.e., Porto Seguro and Microsoft go up and down completely randomly.
Pair Corralation between Porto Seguro and Microsoft
Assuming the 90 days trading horizon Porto Seguro is expected to generate 1.28 times less return on investment than Microsoft. But when comparing it to its historical volatility, Porto Seguro SA is 1.07 times less risky than Microsoft. It trades about 0.09 of its potential returns per unit of risk. Microsoft is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,275 in Microsoft on September 19, 2024 and sell it today you would earn a total of 6,256 from holding Microsoft or generate 118.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Porto Seguro SA vs. Microsoft
Performance |
| Timeline |
| Porto Seguro SA |
| Microsoft |
Porto Seguro and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Porto Seguro and Microsoft
The main advantage of trading using opposite Porto Seguro and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porto Seguro position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Porto Seguro vs. Banco Bradesco SA | Porto Seguro vs. Petrleo Brasileiro SA | Porto Seguro vs. Ita Unibanco Holding | Porto Seguro vs. Itasa Investimentos |
| Microsoft vs. Oracle | Microsoft vs. Costco Wholesale | Microsoft vs. Porto Seguro SA | Microsoft vs. Fertilizantes Heringer 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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