Correlation Between Microsoft and ENERGY ONE
Can any of the company-specific risk be diversified away by investing in both Microsoft and ENERGY ONE 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 ENERGY ONE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ENERGY ONE, you can compare the effects of market volatilities on Microsoft and ENERGY ONE 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 ENERGY ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ENERGY ONE.
Diversification Opportunities for Microsoft and ENERGY ONE
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and ENERGY is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ENERGY ONE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGY ONE 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 ENERGY ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGY ONE has no effect on the direction of Microsoft i.e., Microsoft and ENERGY ONE go up and down completely randomly.
Pair Corralation between Microsoft and ENERGY ONE
Assuming the 90 days trading horizon Microsoft is expected to generate 0.49 times more return on investment than ENERGY ONE. However, Microsoft is 2.06 times less risky than ENERGY ONE. It trades about 0.09 of its potential returns per unit of risk. ENERGY ONE is currently generating about 0.03 per unit of risk. If you would invest 22,098 in Microsoft on September 16, 2024 and sell it today you would earn a total of 20,517 from holding Microsoft or generate 92.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ENERGY ONE
Performance |
| Timeline |
| Microsoft |
| ENERGY ONE |
Microsoft and ENERGY ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ENERGY ONE
The main advantage of trading using opposite Microsoft and ENERGY ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ENERGY ONE 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 ENERGY ONE will offset losses from the drop in ENERGY ONE's long position.| Microsoft vs. Micron Technology | Microsoft vs. National Retail Properties | Microsoft vs. Casio Computer CoLtd | Microsoft vs. Scandinavian Tobacco Group |
| ENERGY ONE vs. Sims Metal Management | ENERGY ONE vs. CeoTronics AG | ENERGY ONE vs. Cleanaway Waste Management | ENERGY ONE vs. SLR Investment Corp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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