Correlation Between Microsoft Corp and AGF Management

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

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

Diversification Opportunities for Microsoft Corp and AGF Management

-0.09

Correlation Coefficient

Microsoft Corp  AGF Management

Good diversification

The 3 months correlation between Microsoft and AGF is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management and Microsoft Corp 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 Corp CDR are associated (or correlated) with AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and AGF Management go up and down completely randomly.

Pair Corralation between Microsoft Corp and AGF Management

Assuming the 90 days trading horizon Microsoft Corp is expected to generate 22.69 times less return on investment than AGF Management. But when comparing it to its historical volatility, Microsoft Corp CDR is 1.6 times less risky than AGF Management. It trades about 0.01 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  843.00  in AGF Management Limited on September 21, 2024 and sell it today you would earn a total of  213.00  from holding AGF Management Limited or generate 25.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Microsoft Corp CDR  vs.  AGF Management Limited

Microsoft Corp CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

AGF Management

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 14 (%) 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.

Pair Trading with Microsoft Corp and AGF Management

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

The idea behind Microsoft Corp CDR and AGF Management 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.