Correlation Between Microsoft and Sitka Gold
Can any of the company-specific risk be diversified away by investing in both Microsoft and Sitka 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 Sitka Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Sitka Gold Corp, you can compare the effects of market volatilities on Microsoft and Sitka 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 Sitka Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Sitka Gold.
Diversification Opportunities for Microsoft and Sitka Gold
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Sitka is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Sitka Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitka 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 Sitka Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitka Gold Corp has no effect on the direction of Microsoft i.e., Microsoft and Sitka Gold go up and down completely randomly.
Pair Corralation between Microsoft and Sitka Gold
Given the investment horizon of 90 days Microsoft is expected to generate 0.29 times more return on investment than Sitka Gold. However, Microsoft is 3.46 times less risky than Sitka Gold. It trades about -0.04 of its potential returns per unit of risk. Sitka Gold Corp is currently generating about -0.23 per unit of risk. If you would invest 42,388 in Microsoft on August 25, 2024 and sell it today you would lose (688.00) from holding Microsoft or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Sitka Gold Corp
Performance |
| Timeline |
| Microsoft |
| Sitka Gold Corp |
Microsoft and Sitka Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Sitka Gold
The main advantage of trading using opposite Microsoft and Sitka Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Sitka 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 Sitka Gold will offset losses from the drop in Sitka Gold's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Sitka Gold vs. Aurion Resources | Sitka Gold vs. Minera Alamos | Sitka Gold vs. Rio2 Limited | Sitka Gold vs. Roscan Gold Corp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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