Correlation Between Postmedia Network and Microsoft Corp

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

By analyzing existing cross correlation between Postmedia Network Canada and Microsoft Corp CDR, you can compare the effects of market volatilities on Postmedia Network and Microsoft Corp 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 Postmedia Network with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postmedia Network and Microsoft Corp.

Diversification Opportunities for Postmedia Network and Microsoft Corp

-0.28

Correlation Coefficient

Postmedia Network  Microsoft Corp

Very good diversification

The 3 months correlation between Postmedia and Microsoft is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Postmedia Network Canada and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR and Postmedia Network 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 Postmedia Network Canada are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of Postmedia Network i.e., Postmedia Network and Microsoft Corp go up and down completely randomly.

Pair Corralation between Postmedia Network and Microsoft Corp

Assuming the 90 days trading horizon Postmedia Network Canada is expected to under-perform the Microsoft Corp. In addition to that, Postmedia Network is 1.41 times more volatile than Microsoft Corp CDR. It trades about -0.06 of its total potential returns per unit of risk. Microsoft Corp CDR is currently generating about 0.05 per unit of volatility. If you would invest  3,120  in Microsoft Corp CDR on September 27, 2024 and sell it today you would earn a total of  86.00  from holding Microsoft Corp CDR or generate 2.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Postmedia Network Canada  vs.  Microsoft Corp CDR

Postmedia Network Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Postmedia Network is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Corp CDR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Postmedia Network and Microsoft Corp

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

The idea behind Postmedia Network Canada and Microsoft Corp CDR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.