Correlation Between Microsoft and Foran Mining

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

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

Diversification Opportunities for Microsoft and Foran Mining

-0.25

Correlation Coefficient

Microsoft  Foran Mining

Very good diversification

The 3 months correlation between Microsoft and Foran is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Foran Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foran Mining 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 Foran Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foran Mining has no effect on the direction of Microsoft i.e., Microsoft and Foran Mining go up and down completely randomly.

Pair Corralation between Microsoft and Foran Mining

Given the investment horizon of 90 days Microsoft is expected to generate 0.59 times more return on investment than Foran Mining. However, Microsoft is 1.71 times less risky than Foran Mining. It trades about 0.09 of its potential returns per unit of risk. Foran Mining is currently generating about 0.04 per unit of risk. If you would invest  23,712  in Microsoft on September 19, 2024 and sell it today you would earn a total of  20,027  from holding Microsoft or generate 84.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Microsoft  vs.  Foran Mining

Microsoft

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Foran Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Foran Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Foran Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Foran Mining

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

The idea behind Microsoft and Foran Mining 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.