Correlation Between Labrador Iron and Microsoft CDR

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

By analyzing existing cross correlation between Labrador Iron Ore and Microsoft CDR, you can compare the effects of market volatilities on Labrador Iron and Microsoft CDR 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 Labrador Iron with a short position of Microsoft CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Labrador Iron and Microsoft CDR.

Diversification Opportunities for Labrador Iron and Microsoft CDR

-0.72

Correlation Coefficient

Labrador Iron  Microsoft CDR

Pay attention - limited upside

The 3 months correlation between Labrador and Microsoft is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore and Microsoft CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft CDR and Labrador Iron 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 Labrador Iron Ore are associated (or correlated) with Microsoft CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft CDR has no effect on the direction of Labrador Iron i.e., Labrador Iron and Microsoft CDR go up and down completely randomly.

Pair Corralation between Labrador Iron and Microsoft CDR

Assuming the 90 days trading horizon Labrador Iron Ore is expected to under-perform the Microsoft CDR. But the stock apears to be less risky and, when comparing its historical volatility, Labrador Iron Ore is 1.1 times less risky than Microsoft CDR. The stock trades about -0.06 of its potential returns per unit of risk. The Microsoft CDR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,313  in Microsoft CDR on May 17, 2025 and sell it today you would earn a total of  447.00  from holding Microsoft CDR or generate 13.49% return on investment over 90 days.

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

Labrador Iron Ore  vs.  Microsoft CDR

Labrador Iron Ore

Risk-Adjusted Performance

Weakest

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

Microsoft CDR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Microsoft CDR displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Labrador Iron and Microsoft CDR

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

The idea behind Labrador Iron Ore and Microsoft CDR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .