Correlation Between Insumos Agroquimicos and Microsoft

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

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

Diversification Opportunities for Insumos Agroquimicos and Microsoft

-0.76

Correlation Coefficient

Insumos Agroquimicos  Microsoft

Pay attention - limited upside

The 3 months correlation between Insumos and Microsoft is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Insumos Agroquimicos SA and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Insumos Agroquimicos 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 Insumos Agroquimicos 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 Insumos Agroquimicos i.e., Insumos Agroquimicos and Microsoft go up and down completely randomly.

Pair Corralation between Insumos Agroquimicos and Microsoft

Assuming the 90 days trading horizon Insumos Agroquimicos SA is expected to generate 82.04 times more return on investment than Microsoft. However, Insumos Agroquimicos is 82.04 times more volatile than Microsoft. It trades about 0.13 of its potential returns per unit of risk. Microsoft is currently generating about -0.14 per unit of risk. If you would invest  27,000  in Insumos Agroquimicos SA on August 30, 2024 and sell it today you would earn a total of  273,000  from holding Insumos Agroquimicos SA or generate 1011.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Insumos Agroquimicos SA  vs.  Microsoft

Insumos Agroquimicos

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insumos Agroquimicos SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Insumos Agroquimicos sustained solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Insumos Agroquimicos and Microsoft

The main advantage of trading using opposite Insumos Agroquimicos and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insumos Agroquimicos 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 Insumos Agroquimicos SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.