Correlation Between Microsoft and ROKMASTER Resources

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

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

Diversification Opportunities for Microsoft and ROKMASTER Resources

-0.32

Correlation Coefficient

Microsoft  ROKMASTER Resources

Very good diversification

The 3 months correlation between Microsoft and ROKMASTER is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ROKMASTER Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROKMASTER Resources 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 ROKMASTER Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROKMASTER Resources Corp has no effect on the direction of Microsoft i.e., Microsoft and ROKMASTER Resources go up and down completely randomly.

Pair Corralation between Microsoft and ROKMASTER Resources

Given the investment horizon of 90 days Microsoft is expected to under-perform the ROKMASTER Resources. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 9.55 times less risky than ROKMASTER Resources. The stock trades about -0.01 of its potential returns per unit of risk. The ROKMASTER Resources Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.50  in ROKMASTER Resources Corp on September 23, 2024 and sell it today you would lose (0.50) from holding ROKMASTER Resources Corp or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Microsoft  vs.  ROKMASTER Resources Corp

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.

ROKMASTER Resources Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ROKMASTER Resources Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ROKMASTER Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and ROKMASTER Resources

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

The idea behind Microsoft and ROKMASTER Resources 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.