Correlation Between Microsoft and Champion Bear

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

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

Diversification Opportunities for Microsoft and Champion Bear

0.63

Correlation Coefficient

Microsoft  Champion Bear

Poor diversification

The 3 months correlation between Microsoft and Champion is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Champion Bear Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Bear Resources 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 Champion Bear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Bear Resources has no effect on the direction of Microsoft i.e., Microsoft and Champion Bear go up and down completely randomly.

Pair Corralation between Microsoft and Champion Bear

Given the investment horizon of 90 days Microsoft is expected to under-perform the Champion Bear. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 14.06 times less risky than Champion Bear. The stock trades about -0.1 of its potential returns per unit of risk. The Champion Bear Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Champion Bear Resources on December 31, 2024 and sell it today you would lose (1.00) from holding Champion Bear Resources or give up 33.33% of portfolio value over 90 days.

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

Microsoft  vs.  Champion Bear Resources

Microsoft

Risk-Adjusted Performance

Very Weak

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

Champion Bear Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Bear Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Champion Bear reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Champion Bear

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

The idea behind Microsoft and Champion Bear Resources 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.