Correlation Between Microsoft and StrikePoint Gold

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

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

Diversification Opportunities for Microsoft and StrikePoint Gold

-0.37

Correlation Coefficient

Microsoft  StrikePoint Gold

Very good diversification

The 3 months correlation between Microsoft and StrikePoint is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and StrikePoint Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StrikePoint Gold 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 StrikePoint Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StrikePoint Gold has no effect on the direction of Microsoft i.e., Microsoft and StrikePoint Gold go up and down completely randomly.

Pair Corralation between Microsoft and StrikePoint Gold

Given the investment horizon of 90 days Microsoft is expected to generate 0.11 times more return on investment than StrikePoint Gold. However, Microsoft is 8.9 times less risky than StrikePoint Gold. It trades about 0.05 of its potential returns per unit of risk. StrikePoint Gold is currently generating about -0.02 per unit of risk. If you would invest  43,428  in Microsoft on September 17, 2024 and sell it today you would earn a total of  1,743  from holding Microsoft or generate 4.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  StrikePoint Gold

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

StrikePoint Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StrikePoint Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Microsoft and StrikePoint Gold

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

The idea behind Microsoft and StrikePoint Gold 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.