Correlation Between Microsoft Corp and MEG Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and MEG 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 Corp and MEG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and MEG Energy Corp, you can compare the effects of market volatilities on Microsoft Corp and MEG 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 Corp with a short position of MEG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and MEG Energy.
Diversification Opportunities for Microsoft Corp and MEG Energy
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and MEG is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and MEG Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEG Energy Corp and Microsoft Corp 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 Corp CDR are associated (or correlated) with MEG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEG Energy Corp has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and MEG Energy go up and down completely randomly.
Pair Corralation between Microsoft Corp and MEG Energy
Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.95 times more return on investment than MEG Energy. However, Microsoft Corp CDR is 1.05 times less risky than MEG Energy. It trades about -0.12 of its potential returns per unit of risk. MEG Energy Corp is currently generating about -0.17 per unit of risk. If you would invest 3,153 in Microsoft Corp CDR on November 21, 2024 and sell it today you would lose (159.00) from holding Microsoft Corp CDR or give up 5.04% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft Corp CDR vs. MEG Energy Corp
Performance |
Timeline |
Microsoft Corp CDR |
MEG Energy Corp |
Microsoft Corp and MEG Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft Corp and MEG Energy
The main advantage of trading using opposite Microsoft Corp and MEG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, MEG 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 MEG Energy will offset losses from the drop in MEG Energy's long position.Microsoft Corp vs. Ramp Metals | ||
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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