Correlation Between Peak Resources and Microsoft
Can any of the company-specific risk be diversified away by investing in both Peak Resources 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 Peak Resources and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Peak Resources Limited and Microsoft, you can compare the effects of market volatilities on Peak Resources 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 Peak Resources with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peak Resources and Microsoft.
Diversification Opportunities for Peak Resources and Microsoft
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Peak and Microsoft is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Peak Resources Limited and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Peak Resources 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 Peak Resources Limited 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 Peak Resources i.e., Peak Resources and Microsoft go up and down completely randomly.
Pair Corralation between Peak Resources and Microsoft
Assuming the 90 days horizon Peak Resources Limited is expected to generate 8.18 times more return on investment than Microsoft. However, Peak Resources is 8.18 times more volatile than Microsoft. It trades about 0.06 of its potential returns per unit of risk. Microsoft is currently generating about 0.28 per unit of risk. If you would invest 6.10 in Peak Resources Limited on September 13, 2024 and sell it today you would earn a total of 0.15 from holding Peak Resources Limited or generate 2.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Peak Resources Limited vs. Microsoft
Performance |
| Timeline |
| Peak Resources |
| Microsoft |
Peak Resources and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Peak Resources and Microsoft
The main advantage of trading using opposite Peak Resources and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peak Resources 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.| Peak Resources vs. Carsales | Peak Resources vs. SALESFORCE INC CDR | Peak Resources vs. KINGBOARD CHEMICAL | Peak Resources vs. Shin Etsu Chemical Co |
| Microsoft vs. COMMERCIAL VEHICLE | Microsoft vs. Singapore Telecommunications Limited | Microsoft vs. INTERSHOP Communications Aktiengesellschaft | Microsoft vs. Iridium Communications |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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