Correlation Between Microsoft and Catalyst Metals
Can any of the company-specific risk be diversified away by investing in both Microsoft and Catalyst Metals 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 Catalyst Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Catalyst Metals, you can compare the effects of market volatilities on Microsoft and Catalyst Metals 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 Catalyst Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Catalyst Metals.
Diversification Opportunities for Microsoft and Catalyst Metals
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Catalyst is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Microsoft i.e., Microsoft and Catalyst Metals go up and down completely randomly.
Pair Corralation between Microsoft and Catalyst Metals
Given the investment horizon of 90 days Microsoft is expected to under-perform the Catalyst Metals. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.6 times less risky than Catalyst Metals. The stock trades about -0.11 of its potential returns per unit of risk. The Catalyst Metals is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 263.00 in Catalyst Metals on December 30, 2024 and sell it today you would earn a total of 288.00 from holding Catalyst Metals or generate 109.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 96.88% |
Values | Daily Returns |
Microsoft vs. Catalyst Metals
Performance |
Timeline |
Microsoft |
Catalyst Metals |
Microsoft and Catalyst Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Catalyst Metals
The main advantage of trading using opposite Microsoft and Catalyst Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Catalyst Metals 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 Catalyst Metals will offset losses from the drop in Catalyst Metals' long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
Catalyst Metals vs. Bell Financial Group | Catalyst Metals vs. Readytech Holdings | Catalyst Metals vs. Qbe Insurance Group | Catalyst Metals vs. Macquarie Bank Limited |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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