Correlation Between Microsoft and Agro Capital

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

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

Diversification Opportunities for Microsoft and Agro Capital

-0.02

Correlation Coefficient

Microsoft  Agro Capital

Good diversification

The 3 months correlation between Microsoft and Agro is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Agro Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Capital Management 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 Agro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Capital Management has no effect on the direction of Microsoft i.e., Microsoft and Agro Capital go up and down completely randomly.

Pair Corralation between Microsoft and Agro Capital

Given the investment horizon of 90 days Microsoft is expected to under-perform the Agro Capital. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 15.08 times less risky than Agro Capital. The stock trades about -0.08 of its potential returns per unit of risk. The Agro Capital Management is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2.25  in Agro Capital Management on December 29, 2024 and sell it today you would earn a total of  1.89  from holding Agro Capital Management or generate 84.0% return on investment over 90 days.

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

Microsoft  vs.  Agro Capital Management

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 abnormal 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.

Agro Capital Management

Risk-Adjusted Performance

OK

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

Pair Trading with Microsoft and Agro Capital

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

The idea behind Microsoft and Agro Capital Management 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.