Correlation Between Microsoft and Damara Gold

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

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

Diversification Opportunities for Microsoft and Damara Gold

0.0

Correlation Coefficient

Microsoft  Damara Gold

Pay attention - limited upside

The 3 months correlation between Microsoft and Damara is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Damara Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Damara Gold Corp 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 Damara Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Damara Gold Corp has no effect on the direction of Microsoft i.e., Microsoft and Damara Gold go up and down completely randomly.

Pair Corralation between Microsoft and Damara Gold

If you would invest (100.00) in Damara Gold Corp on September 29, 2024 and sell it today you would earn a total of  100.00  from holding Damara Gold Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Damara Gold Corp

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Damara Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Damara Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Damara Gold is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Microsoft and Damara Gold

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

The idea behind Microsoft and Damara Gold 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.