Correlation Between Microsoft and AGNC Investment
Can any of the company-specific risk be diversified away by investing in both Microsoft and AGNC Investment 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 AGNC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and AGNC Investment Corp, you can compare the effects of market volatilities on Microsoft and AGNC Investment 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 AGNC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AGNC Investment.
Diversification Opportunities for Microsoft and AGNC Investment
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and AGNC is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AGNC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGNC Investment 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 AGNC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGNC Investment Corp has no effect on the direction of Microsoft i.e., Microsoft and AGNC Investment go up and down completely randomly.
Pair Corralation between Microsoft and AGNC Investment
Given the investment horizon of 90 days Microsoft is expected to under-perform the AGNC Investment. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.4 times less risky than AGNC Investment. The stock trades about -0.14 of its potential returns per unit of risk. The AGNC Investment Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 962.00 in AGNC Investment Corp on January 26, 2024 and sell it today you would lose (26.00) from holding AGNC Investment Corp or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. AGNC Investment Corp
Performance |
| Timeline |
| Microsoft |
| AGNC Investment Corp |
Microsoft and AGNC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AGNC Investment
The main advantage of trading using opposite Microsoft and AGNC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AGNC Investment 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 AGNC Investment will offset losses from the drop in AGNC Investment's long position.| Microsoft vs. Crowdstrike Holdings | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Cloudflare |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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