Correlation Between Microsoft and Africa Oil
Can any of the company-specific risk be diversified away by investing in both Microsoft and Africa Oil 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 Africa Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Africa Oil Corp, you can compare the effects of market volatilities on Microsoft and Africa Oil 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 Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Africa Oil.
Diversification Opportunities for Microsoft and Africa Oil
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Africa is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp 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 Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of Microsoft i.e., Microsoft and Africa Oil go up and down completely randomly.
Pair Corralation between Microsoft and Africa Oil
Given the investment horizon of 90 days Microsoft is expected to generate 0.64 times more return on investment than Africa Oil. However, Microsoft is 1.56 times less risky than Africa Oil. It trades about 0.01 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.03 per unit of risk. If you would invest 41,743 in Microsoft on November 5, 2024 and sell it today you would lose (237.00) from holding Microsoft or give up 0.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.59% |
| Values | Daily Returns |
Microsoft vs. Africa Oil Corp
Performance |
| Timeline |
| Microsoft |
| Africa Oil Corp |
Microsoft and Africa Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Africa Oil
The main advantage of trading using opposite Microsoft and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Africa Oil 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 Africa Oil will offset losses from the drop in Africa Oil's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Africa Oil vs. International Petroleum | Africa Oil vs. Africa Energy Corp | Africa Oil vs. Africa Oil Corp | Africa Oil vs. Lundin Mining |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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