Correlation Between Microsoft CDR and ARC Resources

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

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

Diversification Opportunities for Microsoft CDR and ARC Resources

0.25

Correlation Coefficient

Microsoft CDR  ARC Resources

Modest diversification

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

Pair Corralation between Microsoft CDR and ARC Resources

Assuming the 90 days trading horizon Microsoft CDR is expected to generate 0.68 times more return on investment than ARC Resources. However, Microsoft CDR is 1.47 times less risky than ARC Resources. It trades about 0.06 of its potential returns per unit of risk. ARC Resources is currently generating about -0.02 per unit of risk. If you would invest  3,582  in Microsoft CDR on July 7, 2025 and sell it today you would earn a total of  124.00  from holding Microsoft CDR or generate 3.46% return on investment over 90 days.

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

Microsoft CDR  vs.  ARC Resources

Microsoft CDR

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft CDR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Microsoft CDR is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ARC Resources

Risk-Adjusted Performance

Weakest

Over the last 90 days ARC Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ARC Resources 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 CDR and ARC Resources

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

The idea behind Microsoft CDR and ARC Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.