Correlation Between Microsoft and Thunderstruck Resources
Can any of the company-specific risk be diversified away by investing in both Microsoft and Thunderstruck 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 Thunderstruck Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Thunderstruck Resources, you can compare the effects of market volatilities on Microsoft and Thunderstruck 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 Thunderstruck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Thunderstruck Resources.
Diversification Opportunities for Microsoft and Thunderstruck Resources
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Thunderstruck is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Thunderstruck Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunderstruck 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 Thunderstruck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunderstruck Resources has no effect on the direction of Microsoft i.e., Microsoft and Thunderstruck Resources go up and down completely randomly.
Pair Corralation between Microsoft and Thunderstruck Resources
Given the investment horizon of 90 days Microsoft is expected to generate 12.68 times less return on investment than Thunderstruck Resources. But when comparing it to its historical volatility, Microsoft is 7.02 times less risky than Thunderstruck Resources. It trades about 0.03 of its potential returns per unit of risk. Thunderstruck Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5.50 in Thunderstruck Resources on August 29, 2024 and sell it today you would earn a total of 0.50 from holding Thunderstruck Resources or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Microsoft vs. Thunderstruck Resources
Performance |
| Timeline |
| Microsoft |
| Thunderstruck Resources |
Microsoft and Thunderstruck Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Thunderstruck Resources
The main advantage of trading using opposite Microsoft and Thunderstruck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Thunderstruck 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 Thunderstruck Resources will offset losses from the drop in Thunderstruck Resources' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Thunderstruck Resources vs. Asiabasemetals | Thunderstruck Resources vs. Lupaka Gold Corp | Thunderstruck Resources vs. Avrupa Minerals | Thunderstruck Resources vs. Angkor Resources Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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