Correlation Between Microsoft and Greatland Gold
Can any of the company-specific risk be diversified away by investing in both Microsoft and Greatland 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 Greatland Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Greatland Gold plc, you can compare the effects of market volatilities on Microsoft and Greatland 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 Greatland Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Greatland Gold.
Diversification Opportunities for Microsoft and Greatland Gold
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Greatland is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Greatland Gold plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatland Gold plc 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 Greatland Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatland Gold plc has no effect on the direction of Microsoft i.e., Microsoft and Greatland Gold go up and down completely randomly.
Pair Corralation between Microsoft and Greatland Gold
Given the investment horizon of 90 days Microsoft is expected to generate 0.3 times more return on investment than Greatland Gold. However, Microsoft is 3.35 times less risky than Greatland Gold. It trades about 0.05 of its potential returns per unit of risk. Greatland Gold plc is currently generating about -0.01 per unit of risk. If you would invest 37,145 in Microsoft on September 3, 2024 and sell it today you would earn a total of 5,953 from holding Microsoft or generate 16.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Microsoft vs. Greatland Gold plc
Performance |
| Timeline |
| Microsoft |
| Greatland Gold plc |
Microsoft and Greatland Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Greatland Gold
The main advantage of trading using opposite Microsoft and Greatland Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Greatland 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 Greatland Gold will offset losses from the drop in Greatland Gold'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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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