Correlation Between Microsoft and Imperial Oil
Can any of the company-specific risk be diversified away by investing in both Microsoft and Imperial 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 Imperial Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Imperial Oil, you can compare the effects of market volatilities on Microsoft and Imperial 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 Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Imperial Oil.
Diversification Opportunities for Microsoft and Imperial Oil
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Imperial is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of Microsoft i.e., Microsoft and Imperial Oil go up and down completely randomly.
Pair Corralation between Microsoft and Imperial Oil
Given the investment horizon of 90 days Microsoft is expected to under-perform the Imperial Oil. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.22 times less risky than Imperial Oil. The stock trades about -0.07 of its potential returns per unit of risk. The Imperial Oil is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 10,029 in Imperial Oil on November 4, 2024 and sell it today you would lose (362.00) from holding Imperial Oil or give up 3.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.56% |
| Values | Daily Returns |
Microsoft vs. Imperial Oil
Performance |
| Timeline |
| Microsoft |
| Imperial Oil |
Microsoft and Imperial Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Imperial Oil
The main advantage of trading using opposite Microsoft and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Imperial 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 Imperial Oil will offset losses from the drop in Imperial Oil's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Imperial Oil vs. Canadian Natural Resources | Imperial Oil vs. Cenovus Energy | Imperial Oil vs. TC Energy Corp | Imperial Oil vs. Suncor Energy |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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