Correlation Between Microsoft and Fortune Minerals

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

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

Diversification Opportunities for Microsoft and Fortune Minerals

0.3

Correlation Coefficient

Microsoft  Fortune Minerals

Weak diversification

The 3 months correlation between Microsoft and Fortune is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fortune Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Minerals 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 Fortune Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Minerals has no effect on the direction of Microsoft i.e., Microsoft and Fortune Minerals go up and down completely randomly.

Pair Corralation between Microsoft and Fortune Minerals

Given the investment horizon of 90 days Microsoft is expected to under-perform the Fortune Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 21.82 times less risky than Fortune Minerals. The stock trades about -0.1 of its potential returns per unit of risk. The Fortune Minerals Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1.85  in Fortune Minerals Limited on December 23, 2024 and sell it today you would earn a total of  4.30  from holding Fortune Minerals Limited or generate 232.43% return on investment over 90 days.

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

Microsoft  vs.  Fortune Minerals Limited

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.

Fortune Minerals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Minerals Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortune Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Fortune Minerals

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

The idea behind Microsoft and Fortune Minerals Limited 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.