Correlation Between 00108WAF7 and MICROSOFT

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Can any of the company-specific risk be diversified away by investing in both 00108WAF7 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 00108WAF7 and MICROSOFT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AEP TEX INC and MICROSOFT PORATION, you can compare the effects of market volatilities on 00108WAF7 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 00108WAF7 with a short position of MICROSOFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of 00108WAF7 and MICROSOFT.

Diversification Opportunities for 00108WAF7 and MICROSOFT

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between 00108WAF7 and MICROSOFT is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding AEP TEX INC and MICROSOFT PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MICROSOFT PORATION and 00108WAF7 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 AEP TEX INC 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 PORATION has no effect on the direction of 00108WAF7 i.e., 00108WAF7 and MICROSOFT go up and down completely randomly.

Pair Corralation between 00108WAF7 and MICROSOFT

Assuming the 90 days trading horizon AEP TEX INC is expected to generate 114.92 times more return on investment than MICROSOFT. However, 00108WAF7 is 114.92 times more volatile than MICROSOFT PORATION. It trades about 0.09 of its potential returns per unit of risk. MICROSOFT PORATION is currently generating about 0.01 per unit of risk. If you would invest  7,210  in AEP TEX INC on September 1, 2024 and sell it today you would lose (121.00) from holding AEP TEX INC or give up 1.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy71.2%
ValuesDaily Returns

AEP TEX INC  vs.  MICROSOFT PORATION

 Performance 
       Timeline  
AEP TEX INC 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, 00108WAF7 sustained solid returns over the last few months and may actually be approaching a breakup point.
MICROSOFT PORATION 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MICROSOFT PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MICROSOFT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

00108WAF7 and MICROSOFT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 00108WAF7 and MICROSOFT

The main advantage of trading using opposite 00108WAF7 and MICROSOFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 00108WAF7 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.
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The idea behind AEP TEX INC and MICROSOFT PORATION pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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