Correlation Between Microsoft and Lumina Gold
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lumina 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 Lumina Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lumina Gold Corp, you can compare the effects of market volatilities on Microsoft and Lumina 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 Lumina Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lumina Gold.
Diversification Opportunities for Microsoft and Lumina Gold
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Lumina is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lumina Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumina Gold 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 Lumina Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumina Gold Corp has no effect on the direction of Microsoft i.e., Microsoft and Lumina Gold go up and down completely randomly.
Pair Corralation between Microsoft and Lumina Gold
Given the investment horizon of 90 days Microsoft is expected to generate 1.2 times less return on investment than Lumina Gold. But when comparing it to its historical volatility, Microsoft is 2.71 times less risky than Lumina Gold. It trades about 0.09 of its potential returns per unit of risk. Lumina Gold Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 34.00 in Lumina Gold Corp on August 29, 2024 and sell it today you would earn a total of 15.00 from holding Lumina Gold Corp or generate 44.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. Lumina Gold Corp
Performance |
| Timeline |
| Microsoft |
| Lumina Gold Corp |
Microsoft and Lumina Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lumina Gold
The main advantage of trading using opposite Microsoft and Lumina Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lumina 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 Lumina Gold will offset losses from the drop in Lumina Gold's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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