Correlation Between Microsoft and Metalla Royalty

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

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

Diversification Opportunities for Microsoft and Metalla Royalty

0.09

Correlation Coefficient

Microsoft  Metalla Royalty

Significant diversification

The 3 months correlation between Microsoft and Metalla is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Metalla Royalty Streaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalla Royalty Streaming 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 Metalla Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalla Royalty Streaming has no effect on the direction of Microsoft i.e., Microsoft and Metalla Royalty go up and down completely randomly.

Pair Corralation between Microsoft and Metalla Royalty

Given the investment horizon of 90 days Microsoft is expected to generate 0.65 times more return on investment than Metalla Royalty. However, Microsoft is 1.54 times less risky than Metalla Royalty. It trades about 0.09 of its potential returns per unit of risk. Metalla Royalty Streaming is currently generating about -0.03 per unit of risk. If you would invest  40,807  in Microsoft on February 18, 2025 and sell it today you would earn a total of  5,080  from holding Microsoft or generate 12.45% return on investment over 90 days.

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

Microsoft  vs.  Metalla Royalty Streaming

Microsoft

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

Metalla Royalty Streaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalla Royalty Streaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microsoft and Metalla Royalty

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

The idea behind Microsoft and Metalla Royalty Streaming 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.