Correlation Between Microsoft Corp and Capstone Mining

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

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

Diversification Opportunities for Microsoft Corp and Capstone Mining

-0.6

Correlation Coefficient

Microsoft Corp  Capstone Mining

Excellent diversification

The 3 months correlation between Microsoft and Capstone is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp and Microsoft Corp 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 Corp CDR are associated (or correlated) with Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Capstone Mining go up and down completely randomly.

Pair Corralation between Microsoft Corp and Capstone Mining

Assuming the 90 days trading horizon Microsoft Corp is expected to generate 1.09 times less return on investment than Capstone Mining. But when comparing it to its historical volatility, Microsoft Corp CDR is 2.14 times less risky than Capstone Mining. It trades about 0.1 of its potential returns per unit of risk. Capstone Mining Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  514.00  in Capstone Mining Corp on September 26, 2024 and sell it today you would earn a total of  386.00  from holding Capstone Mining Corp or generate 75.1% return on investment over 90 days.

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

Microsoft Corp CDR  vs.  Capstone Mining Corp

Microsoft Corp CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 1 (%) 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.

Capstone Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microsoft Corp and Capstone Mining

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

The idea behind Microsoft Corp CDR and Capstone Mining 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.