Correlation Between Microsoft and AIRA Capital

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

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

Diversification Opportunities for Microsoft and AIRA Capital

-0.41

Correlation Coefficient

Microsoft  AIRA Capital

Very good diversification

The 3 months correlation between Microsoft and AIRA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AIRA Capital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIRA Capital Public 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 AIRA Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIRA Capital Public has no effect on the direction of Microsoft i.e., Microsoft and AIRA Capital go up and down completely randomly.

Pair Corralation between Microsoft and AIRA Capital

Given the investment horizon of 90 days Microsoft is expected to under-perform the AIRA Capital. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 70.66 times less risky than AIRA Capital. The stock trades about -0.02 of its potential returns per unit of risk. The AIRA Capital Public is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  171.00  in AIRA Capital Public on September 27, 2024 and sell it today you would lose (42.00) from holding AIRA Capital Public or give up 24.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.8%
Values	Daily Returns

Microsoft  vs.  AIRA Capital Public

Microsoft

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AIRA Capital Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIRA Capital Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Microsoft and AIRA Capital

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

The idea behind Microsoft and AIRA Capital Public 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.