Correlation Between GOLD ROAD and Microsoft
Can any of the company-specific risk be diversified away by investing in both GOLD ROAD and Microsoft 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 GOLD ROAD and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOLD ROAD RES and Microsoft, you can compare the effects of market volatilities on GOLD ROAD and Microsoft 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 GOLD ROAD with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOLD ROAD and Microsoft.
Diversification Opportunities for GOLD ROAD and Microsoft
Poor diversification
The 3 months correlation between GOLD and Microsoft is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and GOLD ROAD 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 GOLD ROAD RES are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of GOLD ROAD i.e., GOLD ROAD and Microsoft go up and down completely randomly.
Pair Corralation between GOLD ROAD and Microsoft
Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.62 times more return on investment than Microsoft. However, GOLD ROAD is 1.62 times more volatile than Microsoft. It trades about 0.15 of its potential returns per unit of risk. Microsoft is currently generating about 0.05 per unit of risk. If you would invest 101.00 in GOLD ROAD RES on October 25, 2024 and sell it today you would earn a total of 48.00 from holding GOLD ROAD RES or generate 47.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOLD ROAD RES vs. Microsoft
Performance |
| Timeline |
| GOLD ROAD RES |
| Microsoft |
GOLD ROAD and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOLD ROAD and Microsoft
The main advantage of trading using opposite GOLD ROAD and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.The idea behind GOLD ROAD RES and Microsoft 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.| Microsoft vs. Harmony Gold Mining | Microsoft vs. AOI Electronics Co | Microsoft vs. GREENX METALS LTD | Microsoft vs. Samsung Electronics Co |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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