Correlation Between Microsoft and Lundin Mining

Can any of the company-specific risk be diversified away by investing in both Microsoft and Lundin 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 Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Lundin Mining Corp, you can compare the effects of market volatilities on Microsoft and Lundin 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 Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lundin Mining.

Diversification Opportunities for Microsoft and Lundin Mining

-0.29

Correlation Coefficient

Microsoft  Lundin Mining

Very good diversification

The 3 months correlation between Microsoft and Lundin is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lundin Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin 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 Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining Corp has no effect on the direction of Microsoft i.e., Microsoft and Lundin Mining go up and down completely randomly.

Pair Corralation between Microsoft and Lundin Mining

Assuming the 90 days trading horizon Microsoft is expected to generate 0.64 times more return on investment than Lundin Mining. However, Microsoft is 1.56 times less risky than Lundin Mining. It trades about 0.02 of its potential returns per unit of risk. Lundin Mining Corp is currently generating about -0.05 per unit of risk. If you would invest  42,716  in Microsoft on October 24, 2024 and sell it today you would earn a total of  534.00  from holding Microsoft or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Lundin Mining Corp

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Lundin Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Microsoft and Lundin Mining

The main advantage of trading using opposite Microsoft and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lundin 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 Lundin Mining will offset losses from the drop in Lundin Mining's long position.

The idea behind Microsoft and Lundin Mining Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.