Correlation Between Microsoft and CI Gold

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

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

Diversification Opportunities for Microsoft and CI Gold

-0.13

Correlation Coefficient

Microsoft  CI Gold

Good diversification

The 3 months correlation between Microsoft and VALT is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CI Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Gold Bullion 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 CI Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Gold Bullion has no effect on the direction of Microsoft i.e., Microsoft and CI Gold go up and down completely randomly.

Pair Corralation between Microsoft and CI Gold

Given the investment horizon of 90 days Microsoft is expected to under-perform the CI Gold. In addition to that, Microsoft is 1.34 times more volatile than CI Gold Bullion. It trades about -0.03 of its total potential returns per unit of risk. CI Gold Bullion is currently generating about 0.09 per unit of volatility. If you would invest  2,904  in CI Gold Bullion on September 30, 2024 and sell it today you would earn a total of  329.00  from holding CI Gold Bullion or generate 11.33% return on investment over 90 days.

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

Microsoft  vs.  CI Gold Bullion

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.

CI Gold Bullion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CI Gold Bullion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CI Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and CI Gold

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

The idea behind Microsoft and CI Gold Bullion 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.