Correlation Between Microsoft and AURUBIS

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

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

Diversification Opportunities for Microsoft and AURUBIS

-0.86

Correlation Coefficient

Microsoft  AURUBIS

Pay attention - limited upside

The 3 months correlation between Microsoft and AURUBIS is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AURUBIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURUBIS 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 AURUBIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURUBIS has no effect on the direction of Microsoft i.e., Microsoft and AURUBIS go up and down completely randomly.

Pair Corralation between Microsoft and AURUBIS

Assuming the 90 days trading horizon Microsoft is expected to under-perform the AURUBIS. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.35 times less risky than AURUBIS. The stock trades about -0.11 of its potential returns per unit of risk. The AURUBIS is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,660  in AURUBIS on December 25, 2024 and sell it today you would earn a total of  1,640  from holding AURUBIS or generate 21.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  AURUBIS

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

AURUBIS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AURUBIS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and AURUBIS

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

The idea behind Microsoft and AURUBIS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.