Correlation Between AGF Management and Microsoft Corp

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

By analyzing existing cross correlation between AGF Management Limited and Microsoft Corp CDR, you can compare the effects of market volatilities on AGF Management and Microsoft Corp 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 AGF Management with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGF Management and Microsoft Corp.

Diversification Opportunities for AGF Management and Microsoft Corp

0.06

Correlation Coefficient

AGF Management  Microsoft Corp

Significant diversification

The 3 months correlation between AGF and Microsoft is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR and AGF Management 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 AGF Management Limited are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of AGF Management i.e., AGF Management and Microsoft Corp go up and down completely randomly.

Pair Corralation between AGF Management and Microsoft Corp

Assuming the 90 days trading horizon AGF Management Limited is expected to generate 1.41 times more return on investment than Microsoft Corp. However, AGF Management is 1.41 times more volatile than Microsoft Corp CDR. It trades about 0.15 of its potential returns per unit of risk. Microsoft Corp CDR is currently generating about 0.01 per unit of risk. If you would invest  905.00  in AGF Management Limited on September 30, 2024 and sell it today you would earn a total of  160.00  from holding AGF Management Limited or generate 17.68% return on investment over 90 days.

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

AGF Management Limited  vs.  Microsoft Corp CDR

AGF Management

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, AGF Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft Corp CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft Corp CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AGF Management and Microsoft Corp

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

The idea behind AGF Management Limited and Microsoft Corp CDR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.