Correlation Between Microsoft and NV Gold

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Can any of the company-specific risk be diversified away by investing in both Microsoft and NV 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 NV Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and NV Gold, you can compare the effects of market volatilities on Microsoft and NV 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 NV Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NV Gold.

Diversification Opportunities for Microsoft and NV Gold

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Microsoft and NVGLF is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NV Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NV Gold 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 NV Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NV Gold has no effect on the direction of Microsoft i.e., Microsoft and NV Gold go up and down completely randomly.

Pair Corralation between Microsoft and NV Gold

Given the investment horizon of 90 days Microsoft is expected to generate 3.68 times less return on investment than NV Gold. But when comparing it to its historical volatility, Microsoft is 7.79 times less risky than NV Gold. It trades about 0.06 of its potential returns per unit of risk. NV Gold is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  28.00  in NV Gold on September 4, 2024 and sell it today you would lose (11.00) from holding NV Gold or give up 39.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.37%
ValuesDaily Returns

Microsoft  vs.  NV Gold

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
NV Gold 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in NV Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, NV Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Microsoft and NV Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and NV Gold

The main advantage of trading using opposite Microsoft and NV Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NV 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 NV Gold will offset losses from the drop in NV Gold's long position.
The idea behind Microsoft and NV Gold pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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