Correlation Between Microsoft and Newcrest Mining

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

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

Diversification Opportunities for Microsoft and Newcrest Mining

0.0

Correlation Coefficient

Microsoft  Newcrest Mining

Pay attention - limited upside

The 3 months correlation between Microsoft and Newcrest is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Newcrest Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newcrest 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 Newcrest Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newcrest Mining has no effect on the direction of Microsoft i.e., Microsoft and Newcrest Mining go up and down completely randomly.

Pair Corralation between Microsoft and Newcrest Mining

If you would invest (100.00) in Newcrest Mining on December 27, 2024 and sell it today you would earn a total of  100.00  from holding Newcrest Mining or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Newcrest Mining

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.

Newcrest Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newcrest Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Newcrest Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Newcrest Mining

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

The idea behind Microsoft and Newcrest 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.