Correlation Between Microsoft and Altai Resources
Can any of the company-specific risk be diversified away by investing in both Microsoft and Altai Resources 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 Altai Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Altai Resources, you can compare the effects of market volatilities on Microsoft and Altai Resources 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 Altai Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Altai Resources.
Diversification Opportunities for Microsoft and Altai Resources
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Altai is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Altai Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altai 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 Altai Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altai Resources has no effect on the direction of Microsoft i.e., Microsoft and Altai Resources go up and down completely randomly.
Pair Corralation between Microsoft and Altai Resources
Given the investment horizon of 90 days Microsoft is expected to under-perform the Altai Resources. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 7.05 times less risky than Altai Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Altai Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Altai Resources on August 25, 2024 and sell it today you would earn a total of 1.00 from holding Altai Resources or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Microsoft vs. Altai Resources
Performance |
| Timeline |
| Microsoft |
| Altai Resources |
Microsoft and Altai Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Altai Resources
The main advantage of trading using opposite Microsoft and Altai Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Altai Resources 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 Altai Resources will offset losses from the drop in Altai Resources' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Altai Resources vs. Air Canada | Altai Resources vs. Upstart Investments | Altai Resources vs. Cogeco Communications | Altai Resources vs. Maple Leaf Foods |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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