Correlation Between Microsoft and ETFS Metal

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

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

Diversification Opportunities for Microsoft and ETFS Metal

-0.48

Correlation Coefficient

Microsoft  ETFS Metal

Very good diversification

The 3 months correlation between Microsoft and ETFS is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ETFS Metal Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Metal Securities 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 ETFS Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Metal Securities has no effect on the direction of Microsoft i.e., Microsoft and ETFS Metal go up and down completely randomly.

Pair Corralation between Microsoft and ETFS Metal

Given the investment horizon of 90 days Microsoft is expected to under-perform the ETFS Metal. In addition to that, Microsoft is 6.06 times more volatile than ETFS Metal Securities. It trades about -0.14 of its total potential returns per unit of risk. ETFS Metal Securities is currently generating about 0.17 per unit of volatility. If you would invest  8,569  in ETFS Metal Securities on December 5, 2024 and sell it today you would earn a total of  156.00  from holding ETFS Metal Securities or generate 1.82% return on investment over 90 days.

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

Microsoft  vs.  ETFS Metal Securities

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ETFS Metal Securities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Metal Securities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, ETFS Metal 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 ETFS Metal

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

The idea behind Microsoft and ETFS Metal Securities 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 Commodity Directory module to find actively traded commodities issued by global exchanges.