Correlation Between Microsoft and ValOre Metals

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

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

Diversification Opportunities for Microsoft and ValOre Metals

-0.09

Correlation Coefficient

Microsoft  ValOre Metals

Good diversification

The 3 months correlation between Microsoft and ValOre is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ValOre Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ValOre Metals Corp 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 ValOre Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ValOre Metals Corp has no effect on the direction of Microsoft i.e., Microsoft and ValOre Metals go up and down completely randomly.

Pair Corralation between Microsoft and ValOre Metals

Given the investment horizon of 90 days Microsoft is expected to generate 8.41 times less return on investment than ValOre Metals. But when comparing it to its historical volatility, Microsoft is 13.87 times less risky than ValOre Metals. It trades about 0.09 of its potential returns per unit of risk. ValOre Metals Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19.00  in ValOre Metals Corp on September 21, 2024 and sell it today you would lose (14.40) from holding ValOre Metals Corp or give up 75.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.22%
Values	Daily Returns

Microsoft  vs.  ValOre Metals Corp

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ValOre Metals Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ValOre Metals Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ValOre Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and ValOre Metals

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

The idea behind Microsoft and ValOre Metals Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.