Correlation Between Microsoft Corp and Equinox Gold

Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Equinox Gold 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 Equinox Gold 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 Equinox Gold Corp, you can compare the effects of market volatilities on Microsoft Corp and Equinox Gold 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 Equinox Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Equinox Gold.

Diversification Opportunities for Microsoft Corp and Equinox Gold

0.71

Correlation Coefficient

Microsoft Corp  Equinox Gold

Poor diversification

The 3 months correlation between Microsoft and Equinox is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Equinox Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinox Gold Corp 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 Equinox Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinox Gold Corp has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Equinox Gold go up and down completely randomly.

Pair Corralation between Microsoft Corp and Equinox Gold

Assuming the 90 days trading horizon Microsoft Corp is expected to generate 3.5 times less return on investment than Equinox Gold. But when comparing it to its historical volatility, Microsoft Corp CDR is 2.59 times less risky than Equinox Gold. It trades about 0.04 of its potential returns per unit of risk. Equinox Gold Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  730.00  in Equinox Gold Corp on September 2, 2024 and sell it today you would earn a total of  66.00  from holding Equinox Gold Corp or generate 9.04% return on investment over 90 days.

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

Microsoft Corp CDR  vs.  Equinox Gold Corp

Microsoft Corp CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 3 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Equinox Gold Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equinox Gold Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Equinox Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft Corp and Equinox Gold

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

The idea behind Microsoft Corp CDR and Equinox Gold 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.