Correlation Between Microsoft and Imperial Petroleum
Can any of the company-specific risk be diversified away by investing in both Microsoft and Imperial Petroleum 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 Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Imperial Petroleum, you can compare the effects of market volatilities on Microsoft and Imperial Petroleum 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 Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Imperial Petroleum.
Diversification Opportunities for Microsoft and Imperial Petroleum
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Imperial is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Imperial Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Petroleum 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 Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Petroleum has no effect on the direction of Microsoft i.e., Microsoft and Imperial Petroleum go up and down completely randomly.
Pair Corralation between Microsoft and Imperial Petroleum
Given the investment horizon of 90 days Microsoft is expected to generate 1.89 times more return on investment than Imperial Petroleum. However, Microsoft is 1.89 times more volatile than Imperial Petroleum. It trades about -0.04 of its potential returns per unit of risk. Imperial Petroleum is currently generating about -0.72 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Imperial Petroleum
Performance |
| Timeline |
| Microsoft |
| Imperial Petroleum |
Microsoft and Imperial Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Imperial Petroleum
The main advantage of trading using opposite Microsoft and Imperial Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Imperial Petroleum 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 Petroleum will offset losses from the drop in Imperial Petroleum's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Imperial Petroleum vs. International Seaways | Imperial Petroleum vs. Ardmore Shpng | Imperial Petroleum vs. Aquagold International | Imperial Petroleum vs. Thrivent High Yield |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |