Correlation Between Microsoft and Aeris Indstria

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

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

Diversification Opportunities for Microsoft and Aeris Indstria

0.45

Correlation Coefficient

Microsoft  Aeris Indstria

Very weak diversification

The 3 months correlation between Microsoft and Aeris is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aeris Indstria e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Indstria e 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 Aeris Indstria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Indstria e has no effect on the direction of Microsoft i.e., Microsoft and Aeris Indstria go up and down completely randomly.

Pair Corralation between Microsoft and Aeris Indstria

Assuming the 90 days trading horizon Microsoft is expected to generate 16.0 times less return on investment than Aeris Indstria. But when comparing it to its historical volatility, Microsoft is 5.18 times less risky than Aeris Indstria. It trades about 0.03 of its potential returns per unit of risk. Aeris Indstria e is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  517.00  in Aeris Indstria e on September 29, 2024 and sell it today you would earn a total of  314.00  from holding Aeris Indstria e or generate 60.74% return on investment over 90 days.

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

Microsoft  vs.  Aeris Indstria e

Microsoft

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Aeris Indstria e

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeris Indstria e are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Aeris Indstria unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Aeris Indstria

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

The idea behind Microsoft and Aeris Indstria e 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.