Correlation Between Microsoft and A2Z SMART

Can any of the company-specific risk be diversified away by investing in both Microsoft and A2Z SMART 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 Microsoft and A2Z SMART into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and A2Z SMART TECHNOLOGIES, you can compare the effects of market volatilities on Microsoft and A2Z SMART 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 Microsoft with a short position of A2Z SMART. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and A2Z SMART.

Diversification Opportunities for Microsoft and A2Z SMART

0.72

Correlation Coefficient

Microsoft  A2Z SMART

Poor diversification

The 3 months correlation between Microsoft and A2Z is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and A2Z SMART TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2Z SMART TECHNOLOGIES and Microsoft 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 Microsoft are associated (or correlated) with A2Z SMART. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A2Z SMART TECHNOLOGIES has no effect on the direction of Microsoft i.e., Microsoft and A2Z SMART go up and down completely randomly.

Pair Corralation between Microsoft and A2Z SMART

Assuming the 90 days trading horizon Microsoft is expected to generate 17.77 times less return on investment than A2Z SMART. But when comparing it to its historical volatility, Microsoft is 6.32 times less risky than A2Z SMART. It trades about 0.11 of its potential returns per unit of risk. A2Z SMART TECHNOLOGIES is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  149.00  in A2Z SMART TECHNOLOGIES on September 17, 2024 and sell it today you would earn a total of  466.00  from holding A2Z SMART TECHNOLOGIES or generate 312.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.77%
Values	Daily Returns

Microsoft  vs.  A2Z SMART TECHNOLOGIES

Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) 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.

A2Z SMART TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days A2Z SMART TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, A2Z SMART reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and A2Z SMART

The main advantage of trading using opposite Microsoft and A2Z SMART positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, A2Z SMART 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 A2Z SMART will offset losses from the drop in A2Z SMART's long position.

The idea behind Microsoft and A2Z SMART TECHNOLOGIES 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.