Correlation Between Microsoft and Aura Investments
Can any of the company-specific risk be diversified away by investing in both Microsoft and Aura 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 Aura Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aura Investments, you can compare the effects of market volatilities on Microsoft and Aura 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 Aura Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aura Investments.
Diversification Opportunities for Microsoft and Aura Investments
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Aura is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aura Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura 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 Aura Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Investments has no effect on the direction of Microsoft i.e., Microsoft and Aura Investments go up and down completely randomly.
Pair Corralation between Microsoft and Aura Investments
Given the investment horizon of 90 days Microsoft is expected to generate 0.92 times more return on investment than Aura Investments. However, Microsoft is 1.08 times less risky than Aura Investments. It trades about -0.07 of its potential returns per unit of risk. Aura Investments is currently generating about -0.14 per unit of risk. If you would invest 42,459 in Microsoft on February 7, 2024 and sell it today you would lose (1,105) from holding Microsoft or give up 2.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
Microsoft vs. Aura Investments
Performance |
| Timeline |
| Microsoft |
| Aura Investments |
Microsoft and Aura Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Aura Investments
The main advantage of trading using opposite Microsoft and Aura Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aura 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 Aura Investments will offset losses from the drop in Aura Investments' long position.| Microsoft vs. Crowdstrike Holdings | Microsoft vs. Okta Inc | Microsoft vs. Cloudflare | Microsoft vs. MongoDB |
| Aura Investments vs. Israel Canada | Aura Investments vs. Azrieli Group | Aura Investments vs. Delek Group | Aura Investments vs. Shikun Binui |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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