Correlation Between Microsoft and Aim Investment

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

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

Diversification Opportunities for Microsoft and Aim Investment

-0.18

Correlation Coefficient

Microsoft  Aim Investment

Good diversification

The 3 months correlation between Microsoft and Aim is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aim Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aim Investment Securities 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 Aim Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aim Investment Securities has no effect on the direction of Microsoft i.e., Microsoft and Aim Investment go up and down completely randomly.

Pair Corralation between Microsoft and Aim Investment

Given the investment horizon of 90 days Microsoft is expected to generate 10.16 times more return on investment than Aim Investment. However, Microsoft is 10.16 times more volatile than Aim Investment Securities. It trades about 0.09 of its potential returns per unit of risk. Aim Investment Securities is currently generating about 0.14 per unit of risk. If you would invest  23,571  in Microsoft on September 24, 2024 and sell it today you would earn a total of  20,089  from holding Microsoft or generate 85.23% return on investment over 90 days.

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

Microsoft  vs.  Aim Investment Securities

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Aim Investment Securities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aim Investment Securities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aim Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Aim Investment

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

The idea behind Microsoft and Aim Investment Securities 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 CEOs Directory module to screen CEOs from public companies around the world.