Correlation Between Microsoft and Rock Tech
Can any of the company-specific risk be diversified away by investing in both Microsoft and Rock Tech 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 Rock Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Rock Tech Lithium, you can compare the effects of market volatilities on Microsoft and Rock Tech 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 Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Rock Tech.
Diversification Opportunities for Microsoft and Rock Tech
Very good diversification
The 3 months correlation between Microsoft and Rock is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Microsoft i.e., Microsoft and Rock Tech go up and down completely randomly.
Pair Corralation between Microsoft and Rock Tech
Assuming the 90 days trading horizon Microsoft is expected to generate 0.31 times more return on investment than Rock Tech. However, Microsoft is 3.22 times less risky than Rock Tech. It trades about 0.08 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.02 per unit of risk. If you would invest 23,798 in Microsoft on September 3, 2024 and sell it today you would earn a total of 16,267 from holding Microsoft or generate 68.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Rock Tech Lithium
Performance |
| Timeline |
| Microsoft |
| Rock Tech Lithium |
Microsoft and Rock Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Rock Tech
The main advantage of trading using opposite Microsoft and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.| Microsoft vs. ePlay Digital | Microsoft vs. USWE SPORTS AB | Microsoft vs. InPlay Oil Corp | Microsoft vs. Thai Beverage Public |
| Rock Tech vs. Mineral Resources Limited | Rock Tech vs. Liontown Resources Limited | Rock Tech vs. American Lithium Corp | Rock Tech vs. ADRIATIC METALS LS 013355 |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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