Correlation Between Microsoft CDR and Dollarama

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

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

Diversification Opportunities for Microsoft CDR and Dollarama

0.76

Correlation Coefficient

Microsoft CDR  Dollarama

Poor diversification

The 3 months correlation between Microsoft and Dollarama is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft CDR and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama 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 Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Microsoft CDR i.e., Microsoft CDR and Dollarama go up and down completely randomly.

Pair Corralation between Microsoft CDR and Dollarama

Assuming the 90 days trading horizon Microsoft CDR is expected to generate 0.9 times more return on investment than Dollarama. However, Microsoft CDR is 1.11 times less risky than Dollarama. It trades about 0.39 of its potential returns per unit of risk. Dollarama is currently generating about 0.12 per unit of risk. If you would invest  2,601  in Microsoft CDR on April 21, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Microsoft CDR  vs.  Dollarama

Microsoft CDR

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft CDR are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Microsoft CDR displayed solid returns over the last few months and may actually be approaching a breakup point.

Dollarama

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Microsoft CDR and Dollarama

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

The idea behind Microsoft CDR and Dollarama 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.