Correlation Between Microsoft and Altius Minerals

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

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

Diversification Opportunities for Microsoft and Altius Minerals

-0.25

Correlation Coefficient

Microsoft  Altius Minerals

Very good diversification

The 3 months correlation between Microsoft and Altius is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Altius Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altius Minerals 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 Altius Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altius Minerals has no effect on the direction of Microsoft i.e., Microsoft and Altius Minerals go up and down completely randomly.

Pair Corralation between Microsoft and Altius Minerals

Given the investment horizon of 90 days Microsoft is expected to generate 0.65 times more return on investment than Altius Minerals. However, Microsoft is 1.53 times less risky than Altius Minerals. It trades about 0.02 of its potential returns per unit of risk. Altius Minerals is currently generating about -0.05 per unit of risk. If you would invest  43,264  in Microsoft on September 22, 2024 and sell it today you would earn a total of  396.00  from holding Microsoft or generate 0.92% return on investment over 90 days.

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

Microsoft  vs.  Altius Minerals

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

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

Altius Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altius Minerals 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 Altius Minerals

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

The idea behind Microsoft and Altius Minerals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.