Correlation Between Canadian General and Microsoft CDR

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

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

Diversification Opportunities for Canadian General and Microsoft CDR

0.93

Correlation Coefficient

Canadian General  Microsoft CDR

Almost no diversification

The 3 months correlation between Canadian and Microsoft is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and Microsoft CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft CDR and Canadian General 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 Canadian General Investments 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 Canadian General i.e., Canadian General and Microsoft CDR go up and down completely randomly.

Pair Corralation between Canadian General and Microsoft CDR

Assuming the 90 days trading horizon Canadian General is expected to generate 1.52 times less return on investment than Microsoft CDR. But when comparing it to its historical volatility, Canadian General Investments is 1.22 times less risky than Microsoft CDR. It trades about 0.32 of its potential returns per unit of risk. Microsoft CDR is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  2,601  in Microsoft CDR on April 20, 2025 and sell it today you would earn a total of  1,074  from holding Microsoft CDR or generate 41.29% return on investment over 90 days.

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

Canadian General Investments  vs.  Microsoft CDR

Canadian General Inv

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Canadian General displayed solid returns over the last few months and may actually be approaching a breakup point.

Microsoft CDR

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft CDR are ranked lower than 31 (%) 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 Canadian General and Microsoft CDR

The main advantage of trading using opposite Canadian General and Microsoft CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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 Canadian General Investments 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.