Correlation Between Microsoft and URU Metals
Can any of the company-specific risk be diversified away by investing in both Microsoft and URU 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 URU Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and URU Metals, you can compare the effects of market volatilities on Microsoft and URU 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 URU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and URU Metals.
Diversification Opportunities for Microsoft and URU Metals
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and URU is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and URU Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URU 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 URU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URU Metals has no effect on the direction of Microsoft i.e., Microsoft and URU Metals go up and down completely randomly.
Pair Corralation between Microsoft and URU Metals
Given the investment horizon of 90 days Microsoft is expected to generate 36.99 times less return on investment than URU Metals. But when comparing it to its historical volatility, Microsoft is 3.76 times less risky than URU Metals. It trades about 0.01 of its potential returns per unit of risk. URU Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,500 in URU Metals on September 19, 2024 and sell it today you would earn a total of 1,500 from holding URU Metals or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. URU Metals
Performance |
| Timeline |
| Microsoft |
| URU Metals |
Microsoft and URU Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and URU Metals
The main advantage of trading using opposite Microsoft and URU Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, URU 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 URU Metals will offset losses from the drop in URU Metals' long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| URU Metals vs. Zoom Video Communications | URU Metals vs. Enbridge | URU Metals vs. Endo International PLC | URU Metals vs. DS Smith PLC |
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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