Correlation Between Microsoft and ORMAT TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both Microsoft and ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ORMAT TECHNOLOGIES, you can compare the effects of market volatilities on Microsoft and ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ORMAT TECHNOLOGIES.
Diversification Opportunities for Microsoft and ORMAT TECHNOLOGIES
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and ORMAT is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORMAT TECHNOLOGIES has no effect on the direction of Microsoft i.e., Microsoft and ORMAT TECHNOLOGIES go up and down completely randomly.
Pair Corralation between Microsoft and ORMAT TECHNOLOGIES
Assuming the 90 days trading horizon Microsoft is expected to generate 1.08 times more return on investment than ORMAT TECHNOLOGIES. However, Microsoft is 1.08 times more volatile than ORMAT TECHNOLOGIES. It trades about 0.26 of its potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about 0.03 per unit of risk. If you would invest 40,155 in Microsoft on September 14, 2024 and sell it today you would earn a total of 2,770 from holding Microsoft or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ORMAT TECHNOLOGIES
Performance |
| Timeline |
| Microsoft |
| ORMAT TECHNOLOGIES |
Microsoft and ORMAT TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ORMAT TECHNOLOGIES
The main advantage of trading using opposite Microsoft and ORMAT TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES will offset losses from the drop in ORMAT TECHNOLOGIES's long position.| Microsoft vs. Gaztransport Technigaz SA | Microsoft vs. GFL ENVIRONM | Microsoft vs. COPLAND ROAD CAPITAL | Microsoft vs. TITANIUM TRANSPORTGROUP |
| ORMAT TECHNOLOGIES vs. TYSON FOODS A | ORMAT TECHNOLOGIES vs. EBRO FOODS | ORMAT TECHNOLOGIES vs. China Communications Services | ORMAT TECHNOLOGIES vs. CITIC Telecom International |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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