Correlation Between Microsoft and AKA Brands

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

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

Diversification Opportunities for Microsoft and AKA Brands

0.79

Correlation Coefficient

Microsoft  AKA Brands

Poor diversification

The 3 months correlation between Microsoft and AKA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AKA Brands Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKA Brands Holding 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 AKA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKA Brands Holding has no effect on the direction of Microsoft i.e., Microsoft and AKA Brands go up and down completely randomly.

Pair Corralation between Microsoft and AKA Brands

Given the investment horizon of 90 days Microsoft is expected to generate 0.29 times more return on investment than AKA Brands. However, Microsoft is 3.49 times less risky than AKA Brands. It trades about -0.09 of its potential returns per unit of risk. AKA Brands Holding is currently generating about -0.05 per unit of risk. If you would invest  42,967  in Microsoft on December 27, 2024 and sell it today you would lose (3,909) from holding Microsoft or give up 9.1% of portfolio value over 90 days.

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

Microsoft  vs.  AKA Brands Holding

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.

AKA Brands Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days AKA Brands Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Microsoft and AKA Brands

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

The idea behind Microsoft and AKA Brands Holding 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.