Correlation Between Microsoft and Aztec Minerals

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

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

Diversification Opportunities for Microsoft and Aztec Minerals

-0.32

Correlation Coefficient

Microsoft  Aztec Minerals

Very good diversification

The 3 months correlation between Microsoft and Aztec is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aztec Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aztec Minerals Corp 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 Aztec Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aztec Minerals Corp has no effect on the direction of Microsoft i.e., Microsoft and Aztec Minerals go up and down completely randomly.

Pair Corralation between Microsoft and Aztec Minerals

Given the investment horizon of 90 days Microsoft is expected to generate 3.24 times less return on investment than Aztec Minerals. But when comparing it to its historical volatility, Microsoft is 5.45 times less risky than Aztec Minerals. It trades about 0.03 of its potential returns per unit of risk. Aztec Minerals Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Aztec Minerals Corp on September 24, 2024 and sell it today you would lose (1.00) from holding Aztec Minerals Corp or give up 7.69% of portfolio value over 90 days.

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

Microsoft  vs.  Aztec Minerals Corp

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

Aztec Minerals Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aztec Minerals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Aztec Minerals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Aztec Minerals

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

The idea behind Microsoft and Aztec Minerals Corp 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.