Correlation Between Microsoft and AES
Can any of the company-specific risk be diversified away by investing in both Microsoft and AES 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 AES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and The AES, you can compare the effects of market volatilities on Microsoft and AES 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 AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AES.
Diversification Opportunities for Microsoft and AES
Poor diversification
The 3 months correlation between Microsoft and AES is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES 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 AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Microsoft i.e., Microsoft and AES go up and down completely randomly.
Pair Corralation between Microsoft and AES
Given the investment horizon of 90 days Microsoft is expected to generate 1.05 times less return on investment than AES. But when comparing it to its historical volatility, Microsoft is 3.07 times less risky than AES. It trades about 0.45 of its potential returns per unit of risk. The AES is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 963.00 in The AES on April 19, 2025 and sell it today you would earn a total of 374.00 from holding The AES or generate 38.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. The AES
Performance |
| Timeline |
| Microsoft |
| AES |
Microsoft and AES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and AES
The main advantage of trading using opposite Microsoft and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AES 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 AES will offset losses from the drop in AES's long position.| Microsoft vs. Palantir Technologies Class | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle | Microsoft vs. CoreWeave, Class A |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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