Correlation Between Microsoft and Goliath Resources

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

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

Diversification Opportunities for Microsoft and Goliath Resources

-0.4

Correlation Coefficient

Microsoft  Goliath Resources

Very good diversification

The 3 months correlation between Microsoft and Goliath is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Goliath Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goliath Resources 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 Goliath Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goliath Resources has no effect on the direction of Microsoft i.e., Microsoft and Goliath Resources go up and down completely randomly.

Pair Corralation between Microsoft and Goliath Resources

Given the investment horizon of 90 days Microsoft is expected to under-perform the Goliath Resources. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.84 times less risky than Goliath Resources. The stock trades about -0.11 of its potential returns per unit of risk. The Goliath Resources Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Goliath Resources Limited on December 30, 2024 and sell it today you would earn a total of  48.00  from holding Goliath Resources Limited or generate 68.57% 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.  Goliath Resources 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.

Goliath Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goliath Resources Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Goliath Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Goliath Resources

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

The idea behind Microsoft and Goliath Resources 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.

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 CEOs Directory module to screen CEOs from public companies around the world.