Correlation Between Microsoft and Power Metal
Can any of the company-specific risk be diversified away by investing in both Microsoft and Power Metal 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 Power Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Power Metal Resources, you can compare the effects of market volatilities on Microsoft and Power Metal 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 Power Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Power Metal.
Diversification Opportunities for Microsoft and Power Metal
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Power is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal 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 Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Microsoft i.e., Microsoft and Power Metal go up and down completely randomly.
Pair Corralation between Microsoft and Power Metal
Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than Power Metal. However, Microsoft is 1.45 times less risky than Power Metal. It trades about -0.01 of its potential returns per unit of risk. Power Metal Resources is currently generating about -0.1 per unit of risk. If you would invest 41,858 in Microsoft on November 3, 2024 and sell it today you would lose (352.00) from holding Microsoft or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Microsoft vs. Power Metal Resources
Performance |
| Timeline |
| Microsoft |
| Power Metal Resources |
Microsoft and Power Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Power Metal
The main advantage of trading using opposite Microsoft and Power Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Power Metal 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 Power Metal will offset losses from the drop in Power Metal's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Power Metal vs. American Homes 4 | Power Metal vs. Universal Music Group | Power Metal vs. Applied Materials | Power Metal vs. Cairo Communication SpA |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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