Correlation Between Microsoft and TOTAL ENERGY
Can any of the company-specific risk be diversified away by investing in both Microsoft and TOTAL ENERGY 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 TOTAL ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and TOTAL ENERGY SERVS, you can compare the effects of market volatilities on Microsoft and TOTAL ENERGY 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 TOTAL ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and TOTAL ENERGY.
Diversification Opportunities for Microsoft and TOTAL ENERGY
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and TOTAL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TOTAL ENERGY SERVS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL ENERGY SERVS 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 TOTAL ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL ENERGY SERVS has no effect on the direction of Microsoft i.e., Microsoft and TOTAL ENERGY go up and down completely randomly.
Pair Corralation between Microsoft and TOTAL ENERGY
Assuming the 90 days trading horizon Microsoft is expected to generate 2.31 times less return on investment than TOTAL ENERGY. But when comparing it to its historical volatility, Microsoft is 1.95 times less risky than TOTAL ENERGY. It trades about 0.34 of its potential returns per unit of risk. TOTAL ENERGY SERVS is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 623.00 in TOTAL ENERGY SERVS on September 4, 2024 and sell it today you would earn a total of 146.00 from holding TOTAL ENERGY SERVS or generate 23.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. TOTAL ENERGY SERVS
Performance |
| Timeline |
| Microsoft |
| TOTAL ENERGY SERVS |
Microsoft and TOTAL ENERGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and TOTAL ENERGY
The main advantage of trading using opposite Microsoft and TOTAL ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, TOTAL ENERGY 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 TOTAL ENERGY will offset losses from the drop in TOTAL ENERGY's long position.| Microsoft vs. FAST RETAIL ADR | Microsoft vs. Liberty Broadband | Microsoft vs. TITANIUM TRANSPORTGROUP | Microsoft vs. Marie Brizard Wine |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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