Correlation Between Microsoft and Aris Mining

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

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

Diversification Opportunities for Microsoft and Aris Mining

-0.1

Correlation Coefficient

Microsoft  Aris Mining

Good diversification

The 3 months correlation between Microsoft and Aris is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aris Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Mining 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 Aris Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Mining has no effect on the direction of Microsoft i.e., Microsoft and Aris Mining go up and down completely randomly.

Pair Corralation between Microsoft and Aris Mining

Given the investment horizon of 90 days Microsoft is expected to generate 1.04 times less return on investment than Aris Mining. But when comparing it to its historical volatility, Microsoft is 2.21 times less risky than Aris Mining. It trades about 0.1 of its potential returns per unit of risk. Aris Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Aris Mining on September 13, 2024 and sell it today you would earn a total of  158.00  from holding Aris Mining or generate 61.72% return on investment over 90 days.

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

Microsoft  vs.  Aris Mining

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aris Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aris Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microsoft and Aris Mining

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

The idea behind Microsoft and Aris Mining 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.