Correlation Between Microsoft and Capstone Mining

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

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

Diversification Opportunities for Microsoft and Capstone Mining

0.8

Correlation Coefficient

Microsoft  Capstone Mining

Very poor diversification

The 3 months correlation between Microsoft and Capstone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining 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 Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Microsoft i.e., Microsoft and Capstone Mining go up and down completely randomly.

Pair Corralation between Microsoft and Capstone Mining

Given the investment horizon of 90 days Microsoft is expected to generate 0.52 times more return on investment than Capstone Mining. However, Microsoft is 1.94 times less risky than Capstone Mining. It trades about 0.36 of its potential returns per unit of risk. Capstone Mining Corp is currently generating about 0.11 per unit of risk. If you would invest  39,332  in Microsoft on April 29, 2025 and sell it today you would earn a total of  11,918  from holding Microsoft or generate 30.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  Capstone Mining Corp

Microsoft

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capstone Mining Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Mining Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Capstone Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Capstone Mining

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

The idea behind Microsoft and Capstone Mining 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.