Correlation Between Microsoft and Techgen Metals
Can any of the company-specific risk be diversified away by investing in both Microsoft and Techgen Metals 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 Techgen Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Techgen Metals, you can compare the effects of market volatilities on Microsoft and Techgen Metals 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 Techgen Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Techgen Metals.
Diversification Opportunities for Microsoft and Techgen Metals
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Techgen is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Techgen Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techgen Metals 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 Techgen Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techgen Metals has no effect on the direction of Microsoft i.e., Microsoft and Techgen Metals go up and down completely randomly.
Pair Corralation between Microsoft and Techgen Metals
Given the investment horizon of 90 days Microsoft is expected to generate 1.59 times less return on investment than Techgen Metals. But when comparing it to its historical volatility, Microsoft is 6.87 times less risky than Techgen Metals. It trades about 0.09 of its potential returns per unit of risk. Techgen Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 8.10 in Techgen Metals on September 19, 2024 and sell it today you would lose (4.50) from holding Techgen Metals or give up 55.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
Microsoft vs. Techgen Metals
Performance |
| Timeline |
| Microsoft |
| Techgen Metals |
Microsoft and Techgen Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Techgen Metals
The main advantage of trading using opposite Microsoft and Techgen Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Techgen Metals 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 Techgen Metals will offset losses from the drop in Techgen Metals' long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| Techgen Metals vs. Commonwealth Bank of | Techgen Metals vs. Macquarie Bank Limited | Techgen Metals vs. National Australia Bank | Techgen Metals vs. Medibank Private |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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