Correlation Between Microsoft and Tungsten Mining
Can any of the company-specific risk be diversified away by investing in both Microsoft and Tungsten Mining 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 Tungsten Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Tungsten Mining NL, you can compare the effects of market volatilities on Microsoft and Tungsten Mining 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 Tungsten Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Tungsten Mining.
Diversification Opportunities for Microsoft and Tungsten Mining
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Tungsten is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Tungsten Mining NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tungsten Mining NL 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 Tungsten Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tungsten Mining NL has no effect on the direction of Microsoft i.e., Microsoft and Tungsten Mining go up and down completely randomly.
Pair Corralation between Microsoft and Tungsten Mining
Given the investment horizon of 90 days Microsoft is expected to under-perform the Tungsten Mining. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 5.36 times less risky than Tungsten Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Tungsten Mining NL is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5.40 in Tungsten Mining NL on August 31, 2024 and sell it today you would earn a total of 2.60 from holding Tungsten Mining NL or generate 48.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Tungsten Mining NL
Performance |
| Timeline |
| Microsoft |
| Tungsten Mining NL |
Microsoft and Tungsten Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Tungsten Mining
The main advantage of trading using opposite Microsoft and Tungsten Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Tungsten Mining 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 Tungsten Mining will offset losses from the drop in Tungsten Mining's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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