Correlation Between AGNC INVESTMENT and Microsoft

Can any of the company-specific risk be diversified away by investing in both AGNC INVESTMENT 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 AGNC INVESTMENT and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGNC INVESTMENT and Microsoft, you can compare the effects of market volatilities on AGNC INVESTMENT 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 AGNC INVESTMENT with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC INVESTMENT and Microsoft.

Diversification Opportunities for AGNC INVESTMENT and Microsoft

0.17

Correlation Coefficient

AGNC INVESTMENT  Microsoft

Average diversification

The 3 months correlation between AGNC and Microsoft is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AGNC INVESTMENT and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and AGNC INVESTMENT 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 AGNC INVESTMENT 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 AGNC INVESTMENT i.e., AGNC INVESTMENT and Microsoft go up and down completely randomly.

Pair Corralation between AGNC INVESTMENT and Microsoft

Assuming the 90 days trading horizon AGNC INVESTMENT is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, AGNC INVESTMENT is 1.21 times less risky than Microsoft. The stock trades about -0.12 of its potential returns per unit of risk. The Microsoft is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  39,660  in Microsoft on September 26, 2024 and sell it today you would earn a total of  2,040  from holding Microsoft or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AGNC INVESTMENT  vs.  Microsoft

AGNC INVESTMENT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC INVESTMENT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AGNC INVESTMENT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AGNC INVESTMENT and Microsoft

The main advantage of trading using opposite AGNC INVESTMENT and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC INVESTMENT 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.

The idea behind AGNC INVESTMENT and Microsoft 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.