Correlation Between AGRICULTBK HADR25 and Microsoft

Can any of the company-specific risk be diversified away by investing in both AGRICULTBK HADR25 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 AGRICULTBK HADR25 and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGRICULTBK HADR25 YC and Microsoft, you can compare the effects of market volatilities on AGRICULTBK HADR25 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 AGRICULTBK HADR25 with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGRICULTBK HADR25 and Microsoft.

Diversification Opportunities for AGRICULTBK HADR25 and Microsoft

0.8

Correlation Coefficient

AGRICULTBK HADR25  Microsoft

Very poor diversification

The 3 months correlation between AGRICULTBK and Microsoft is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding AGRICULTBK HADR25 YC and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and AGRICULTBK HADR25 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 AGRICULTBK HADR25 YC 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 AGRICULTBK HADR25 i.e., AGRICULTBK HADR25 and Microsoft go up and down completely randomly.

Pair Corralation between AGRICULTBK HADR25 and Microsoft

Assuming the 90 days trading horizon AGRICULTBK HADR25 YC is expected to generate 1.07 times more return on investment than Microsoft. However, AGRICULTBK HADR25 is 1.07 times more volatile than Microsoft. It trades about 0.33 of its potential returns per unit of risk. Microsoft is currently generating about 0.18 per unit of risk. If you would invest  1,140  in AGRICULTBK HADR25 YC on September 23, 2024 and sell it today you would earn a total of  120.00  from holding AGRICULTBK HADR25 YC or generate 10.53% return on investment over 90 days.

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

AGRICULTBK HADR25 YC  vs.  Microsoft

AGRICULTBK HADR25

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGRICULTBK HADR25 YC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGRICULTBK HADR25 reported solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile 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 AGRICULTBK HADR25 and Microsoft

The main advantage of trading using opposite AGRICULTBK HADR25 and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGRICULTBK HADR25 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 AGRICULTBK HADR25 YC 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.