Correlation Between Microsoft and Golden Metal
Can any of the company-specific risk be diversified away by investing in both Microsoft and Golden Metal 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 Golden Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Golden Metal Resources, you can compare the effects of market volatilities on Microsoft and Golden Metal 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 Golden Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Golden Metal.
Diversification Opportunities for Microsoft and Golden Metal
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Golden is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Golden Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Metal Resources 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 Golden Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Metal Resources has no effect on the direction of Microsoft i.e., Microsoft and Golden Metal go up and down completely randomly.
Pair Corralation between Microsoft and Golden Metal
Assuming the 90 days trading horizon Microsoft is expected to under-perform the Golden Metal. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.17 times less risky than Golden Metal. The stock trades about -0.03 of its potential returns per unit of risk. The Golden Metal Resources is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,480 in Golden Metal Resources on August 31, 2024 and sell it today you would earn a total of 620.00 from holding Golden Metal Resources or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Golden Metal Resources
Performance |
| Timeline |
| Microsoft |
| Golden Metal Resources |
Microsoft and Golden Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Golden Metal
The main advantage of trading using opposite Microsoft and Golden Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Golden Metal 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 Golden Metal will offset losses from the drop in Golden Metal's long position.| Microsoft vs. Fonix Mobile plc | Microsoft vs. Lowland Investment Co | Microsoft vs. Batm Advanced Communications | Microsoft vs. Federal Realty Investment |
| Golden Metal vs. Bankers Investment Trust | Golden Metal vs. Oakley Capital Investments | Golden Metal vs. Federal Realty Investment | Golden Metal vs. New Residential 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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