Correlation Between Microsoft and Copper For

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

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

Diversification Opportunities for Microsoft and Copper For

0.01

Correlation Coefficient

Microsoft  Copper For

Significant diversification

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

Pair Corralation between Microsoft and Copper For

Given the investment horizon of 90 days Microsoft is expected to generate 0.36 times more return on investment than Copper For. However, Microsoft is 2.81 times less risky than Copper For. It trades about 0.05 of its potential returns per unit of risk. Copper For Commercial is currently generating about -0.02 per unit of risk. If you would invest  43,048  in Microsoft on September 15, 2024 and sell it today you would earn a total of  1,679  from holding Microsoft or generate 3.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	82.81%
Values	Daily Returns

Microsoft  vs.  Copper For Commercial

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.

Copper For Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copper For Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Copper For is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Copper For

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

The idea behind Microsoft and Copper For Commercial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.