Correlation Between Microsoft and Coronation Global

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

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

Diversification Opportunities for Microsoft and Coronation Global

0.19

Correlation Coefficient

Microsoft  Coronation Global

Average diversification

The 3 months correlation between Microsoft and Coronation is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Coronation Global Optimum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Global Optimum 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 Coronation Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Global Optimum has no effect on the direction of Microsoft i.e., Microsoft and Coronation Global go up and down completely randomly.

Pair Corralation between Microsoft and Coronation Global

Given the investment horizon of 90 days Microsoft is expected to generate 1.77 times less return on investment than Coronation Global. In addition to that, Microsoft is 1.37 times more volatile than Coronation Global Optimum. It trades about 0.06 of its total potential returns per unit of risk. Coronation Global Optimum is currently generating about 0.15 per unit of volatility. If you would invest  16,584  in Coronation Global Optimum on September 13, 2024 and sell it today you would earn a total of  1,446  from holding Coronation Global Optimum or generate 8.72% return on investment over 90 days.

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

Microsoft  vs.  Coronation Global Optimum

Microsoft

Risk-Adjusted Performance

4 of 100

Modest

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Coronation Global Optimum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Optimum are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Coronation Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Coronation Global

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

The idea behind Microsoft and Coronation Global Optimum 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.