Correlation Between Microsoft and Patria Investments

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

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

Diversification Opportunities for Microsoft and Patria Investments

0.91

Correlation Coefficient

Microsoft  Patria Investments

Almost no diversification

The 3 months correlation between Microsoft and Patria is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments 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 Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of Microsoft i.e., Microsoft and Patria Investments go up and down completely randomly.

Pair Corralation between Microsoft and Patria Investments

Assuming the 90 days trading horizon Microsoft is expected to under-perform the Patria Investments. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.07 times less risky than Patria Investments. The stock trades about -0.11 of its potential returns per unit of risk. The Patria Investments Limited is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,680  in Patria Investments Limited on October 8, 2024 and sell it today you would lose (92.00) from holding Patria Investments Limited or give up 2.5% of portfolio value over 90 days.

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

Microsoft  vs.  Patria Investments Limited

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.

Patria Investments

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Patria Investments

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

The idea behind Microsoft and Patria Investments Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.