Correlation Between Microsoft and Peak Resources

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

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

Diversification Opportunities for Microsoft and Peak Resources

0.24

Correlation Coefficient

Microsoft  Peak Resources

Modest diversification

The 3 months correlation between Microsoft and Peak is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak 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 Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of Microsoft i.e., Microsoft and Peak Resources go up and down completely randomly.

Pair Corralation between Microsoft and Peak Resources

Given the investment horizon of 90 days Microsoft is expected to generate 0.2 times more return on investment than Peak Resources. However, Microsoft is 4.91 times less risky than Peak Resources. It trades about -0.11 of its potential returns per unit of risk. Peak Resources Limited is currently generating about -0.05 per unit of risk. If you would invest  42,398  in Microsoft on December 30, 2024 and sell it today you would lose (4,518) from holding Microsoft or give up 10.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Peak 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.

Peak Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peak Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and Peak Resources

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

The idea behind Microsoft and Peak 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.