Correlation Between Microsoft and Companhia Energtica

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

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

Diversification Opportunities for Microsoft and Companhia Energtica

-0.64

Correlation Coefficient

Microsoft  Companhia Energtica

Excellent diversification

The 3 months correlation between Microsoft and Companhia is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Companhia Energtica do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica 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 Companhia Energtica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energtica has no effect on the direction of Microsoft i.e., Microsoft and Companhia Energtica go up and down completely randomly.

Pair Corralation between Microsoft and Companhia Energtica

Given the investment horizon of 90 days Microsoft is expected to under-perform the Companhia Energtica. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.14 times less risky than Companhia Energtica. The stock trades about -0.08 of its potential returns per unit of risk. The Companhia Energtica do is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,401  in Companhia Energtica do on December 2, 2024 and sell it today you would earn a total of  163.00  from holding Companhia Energtica do or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  Companhia Energtica do

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.

Companhia Energtica

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica do are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Energtica may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and Companhia Energtica

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

The idea behind Microsoft and Companhia Energtica do 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.