Correlation Between Microsoft and Pettenati

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

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

Diversification Opportunities for Microsoft and Pettenati

-0.64

Correlation Coefficient

Microsoft  Pettenati

Excellent diversification

The 3 months correlation between Microsoft and Pettenati is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Pettenati SA Industria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pettenati SA Industria 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 Pettenati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pettenati SA Industria has no effect on the direction of Microsoft i.e., Microsoft and Pettenati go up and down completely randomly.

Pair Corralation between Microsoft and Pettenati

Assuming the 90 days trading horizon Microsoft is expected to generate 0.68 times more return on investment than Pettenati. However, Microsoft is 1.48 times less risky than Pettenati. It trades about 0.12 of its potential returns per unit of risk. Pettenati SA Industria is currently generating about -0.22 per unit of risk. If you would invest  9,958  in Microsoft on September 23, 2024 and sell it today you would earn a total of  1,128  from holding Microsoft or generate 11.33% return on investment over 90 days.

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

Microsoft  vs.  Pettenati SA Industria

Microsoft

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pettenati SA Industria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pettenati SA Industria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Pettenati

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

The idea behind Microsoft and Pettenati SA Industria 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.