Correlation Between Microsoft Corp and Corus Entertainment

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

By analyzing existing cross correlation between Microsoft Corp CDR and Corus Entertainment, you can compare the effects of market volatilities on Microsoft Corp and Corus Entertainment 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 Corp with a short position of Corus Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Corus Entertainment.

Diversification Opportunities for Microsoft Corp and Corus Entertainment

0.01

Correlation Coefficient

Microsoft Corp  Corus Entertainment

Significant diversification

The 3 months correlation between Microsoft and Corus is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Corus Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corus Entertainment and Microsoft Corp 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 Corp CDR are associated (or correlated) with Corus Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corus Entertainment has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Corus Entertainment go up and down completely randomly.

Pair Corralation between Microsoft Corp and Corus Entertainment

Assuming the 90 days trading horizon Microsoft Corp is expected to generate 1.1 times less return on investment than Corus Entertainment. But when comparing it to its historical volatility, Microsoft Corp CDR is 7.0 times less risky than Corus Entertainment. It trades about 0.05 of its potential returns per unit of risk. Corus Entertainment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Corus Entertainment on September 12, 2024 and sell it today you would lose (2.00) from holding Corus Entertainment or give up 15.38% of portfolio value over 90 days.

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

Microsoft Corp CDR  vs.  Corus Entertainment

Microsoft Corp CDR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Corus Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corus Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Corus Entertainment is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft Corp and Corus Entertainment

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

The idea behind Microsoft Corp CDR and Corus Entertainment 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.