Correlation Between Microsoft and Amg Managers

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

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

Diversification Opportunities for Microsoft and Amg Managers

0.21

Correlation Coefficient

Microsoft  Amg Managers

Modest diversification

The 3 months correlation between Microsoft and Amg is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Amg Managers Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Managers Skyline 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 Amg Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Managers Skyline has no effect on the direction of Microsoft i.e., Microsoft and Amg Managers go up and down completely randomly.

Pair Corralation between Microsoft and Amg Managers

Given the investment horizon of 90 days Microsoft is expected to generate 0.77 times more return on investment than Amg Managers. However, Microsoft is 1.3 times less risky than Amg Managers. It trades about 0.03 of its potential returns per unit of risk. Amg Managers Skyline is currently generating about -0.03 per unit of risk. If you would invest  42,831  in Microsoft on September 24, 2024 and sell it today you would earn a total of  829.00  from holding Microsoft or generate 1.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Amg Managers Skyline

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.

Amg Managers Skyline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amg Managers Skyline has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Amg Managers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Amg Managers

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

The idea behind Microsoft and Amg Managers Skyline 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.