Correlation Between Microsoft and Falcon Oil
Can any of the company-specific risk be diversified away by investing in both Microsoft and Falcon 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 Falcon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Falcon Oil Gas, you can compare the effects of market volatilities on Microsoft and Falcon 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 Falcon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Falcon Oil.
Diversification Opportunities for Microsoft and Falcon Oil
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Falcon is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Falcon Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Oil Gas 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 Falcon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Oil Gas has no effect on the direction of Microsoft i.e., Microsoft and Falcon Oil go up and down completely randomly.
Pair Corralation between Microsoft and Falcon Oil
Given the investment horizon of 90 days Microsoft is expected to generate 9.89 times less return on investment than Falcon Oil. But when comparing it to its historical volatility, Microsoft is 4.12 times less risky than Falcon Oil. It trades about 0.12 of its potential returns per unit of risk. Falcon Oil Gas is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 425.00 in Falcon Oil Gas on October 26, 2024 and sell it today you would earn a total of 325.00 from holding Falcon Oil Gas or generate 76.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.56% |
| Values | Daily Returns |
Microsoft vs. Falcon Oil Gas
Performance |
| Timeline |
| Microsoft |
| Falcon Oil Gas |
Microsoft and Falcon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Falcon Oil
The main advantage of trading using opposite Microsoft and Falcon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Falcon 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 Falcon Oil will offset losses from the drop in Falcon Oil's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Falcon Oil vs. Take Two Interactive Software | Falcon Oil vs. Tatton Asset Management | Falcon Oil vs. Coor Service Management | Falcon Oil vs. Accesso Technology Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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