Correlation Between Microsoft and AFRICA CLEAN

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

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

Diversification Opportunities for Microsoft and AFRICA CLEAN

0.0

Correlation Coefficient

Microsoft  AFRICA CLEAN

Pay attention - limited upside

The 3 months correlation between Microsoft and AFRICA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AFRICA CLEAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICA CLEAN ENERGY 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 AFRICA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICA CLEAN ENERGY has no effect on the direction of Microsoft i.e., Microsoft and AFRICA CLEAN go up and down completely randomly.

Pair Corralation between Microsoft and AFRICA CLEAN

If you would invest  42,995  in Microsoft on September 18, 2024 and sell it today you would earn a total of  2,453  from holding Microsoft or generate 5.71% return on investment over 90 days.

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

Microsoft  vs.  AFRICA CLEAN ENERGY

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AFRICA CLEAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Microsoft and AFRICA CLEAN

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

The idea behind Microsoft and AFRICA CLEAN ENERGY 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.