Correlation Between Microsoft and Eskay Mining
Can any of the company-specific risk be diversified away by investing in both Microsoft and Eskay Mining 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 Eskay Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Eskay Mining Corp, you can compare the effects of market volatilities on Microsoft and Eskay Mining 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 Eskay Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Eskay Mining.
Diversification Opportunities for Microsoft and Eskay Mining
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Eskay is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Eskay Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eskay Mining Corp 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 Eskay Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eskay Mining Corp has no effect on the direction of Microsoft i.e., Microsoft and Eskay Mining go up and down completely randomly.
Pair Corralation between Microsoft and Eskay Mining
Given the investment horizon of 90 days Microsoft is expected to generate 0.24 times more return on investment than Eskay Mining. However, Microsoft is 4.15 times less risky than Eskay Mining. It trades about 0.04 of its potential returns per unit of risk. Eskay Mining Corp is currently generating about -0.05 per unit of risk. If you would invest 37,325 in Microsoft on August 25, 2024 and sell it today you would earn a total of 4,375 from holding Microsoft or generate 11.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Eskay Mining Corp
Performance |
| Timeline |
| Microsoft |
| Eskay Mining Corp |
Microsoft and Eskay Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Eskay Mining
The main advantage of trading using opposite Microsoft and Eskay Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Eskay Mining 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 Eskay Mining will offset losses from the drop in Eskay Mining's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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