Correlation Between VanEck Gold and Microsoft

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

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

Diversification Opportunities for VanEck Gold and Microsoft

0.35

Correlation Coefficient

VanEck Gold  Microsoft

Weak diversification

The 3 months correlation between VanEck and Microsoft is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Gold Miners and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and VanEck Gold 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 VanEck Gold Miners are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of VanEck Gold i.e., VanEck Gold and Microsoft go up and down completely randomly.

Pair Corralation between VanEck Gold and Microsoft

Considering the 90-day investment horizon VanEck Gold Miners is expected to generate 1.43 times more return on investment than Microsoft. However, VanEck Gold is 1.43 times more volatile than Microsoft. It trades about 0.05 of its potential returns per unit of risk. Microsoft is currently generating about -0.05 per unit of risk. If you would invest  3,278  in VanEck Gold Miners on February 4, 2024 and sell it today you would earn a total of  66.00  from holding VanEck Gold Miners or generate 2.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

VanEck Gold Miners  vs.  Microsoft

VanEck Gold Miners

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Gold Miners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, VanEck Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Microsoft is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VanEck Gold and Microsoft

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

The idea behind VanEck Gold Miners and Microsoft 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.