Correlation Between Microsoft and Arctic Gold
Can any of the company-specific risk be diversified away by investing in both Microsoft and Arctic Gold 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 Arctic Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Arctic Gold Publ, you can compare the effects of market volatilities on Microsoft and Arctic Gold 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 Arctic Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Arctic Gold.
Diversification Opportunities for Microsoft and Arctic Gold
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Arctic is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Arctic Gold Publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Gold Publ 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 Arctic Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Gold Publ has no effect on the direction of Microsoft i.e., Microsoft and Arctic Gold go up and down completely randomly.
Pair Corralation between Microsoft and Arctic Gold
Given the investment horizon of 90 days Microsoft is expected to generate 0.24 times more return on investment than Arctic Gold. However, Microsoft is 4.19 times less risky than Arctic Gold. It trades about 0.09 of its potential returns per unit of risk. Arctic Gold Publ is currently generating about -0.01 per unit of risk. If you would invest 24,867 in Microsoft on October 23, 2024 and sell it today you would earn a total of 18,036 from holding Microsoft or generate 72.53% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
Microsoft vs. Arctic Gold Publ
Performance |
Timeline |
Microsoft |
Arctic Gold Publ |
Microsoft and Arctic Gold Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Arctic Gold
The main advantage of trading using opposite Microsoft and Arctic Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Arctic Gold 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 Arctic Gold will offset losses from the drop in Arctic Gold's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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