Correlation Between Microsoft and West Mining
Can any of the company-specific risk be diversified away by investing in both Microsoft and West 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 West Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and West Mining Corp, you can compare the effects of market volatilities on Microsoft and West 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 West Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and West Mining.
Diversification Opportunities for Microsoft and West Mining
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and West is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and West Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Mining 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 West Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Mining Corp has no effect on the direction of Microsoft i.e., Microsoft and West Mining go up and down completely randomly.
Pair Corralation between Microsoft and West Mining
Given the investment horizon of 90 days Microsoft is expected to generate 16.06 times less return on investment than West Mining. But when comparing it to its historical volatility, Microsoft is 7.55 times less risky than West Mining. It trades about 0.01 of its potential returns per unit of risk. West Mining Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 16.00 in West Mining Corp on September 3, 2024 and sell it today you would lose (6.10) from holding West Mining Corp or give up 38.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.59% |
| Values | Daily Returns |
Microsoft vs. West Mining Corp
Performance |
| Timeline |
| Microsoft |
| West Mining Corp |
Microsoft and West Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and West Mining
The main advantage of trading using opposite Microsoft and West Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, West 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 West Mining will offset losses from the drop in West Mining's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| West Mining vs. Atomic Minerals | West Mining vs. Mundoro Capital | West Mining vs. E79 Resources Corp | West Mining vs. Norra Metals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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