Correlation Between Microsoft and Esso (Thailand)
Can any of the company-specific risk be diversified away by investing in both Microsoft and Esso (Thailand) 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 Esso (Thailand) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Esso Public, you can compare the effects of market volatilities on Microsoft and Esso (Thailand) 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 Esso (Thailand). Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Esso (Thailand).
Diversification Opportunities for Microsoft and Esso (Thailand)
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Esso is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Esso Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esso (Thailand) 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 Esso (Thailand). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esso (Thailand) has no effect on the direction of Microsoft i.e., Microsoft and Esso (Thailand) go up and down completely randomly.
Pair Corralation between Microsoft and Esso (Thailand)
Given the investment horizon of 90 days Microsoft is expected to generate 0.46 times more return on investment than Esso (Thailand). However, Microsoft is 2.18 times less risky than Esso (Thailand). It trades about 0.22 of its potential returns per unit of risk. Esso Public is currently generating about 0.01 per unit of risk. If you would invest 41,287 in Microsoft on September 22, 2024 and sell it today you would earn a total of 2,373 from holding Microsoft or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Esso Public
Performance |
| Timeline |
| Microsoft |
| Esso (Thailand) |
Microsoft and Esso (Thailand) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Esso (Thailand)
The main advantage of trading using opposite Microsoft and Esso (Thailand) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Esso (Thailand) 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 Esso (Thailand) will offset losses from the drop in Esso (Thailand)'s long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| Esso (Thailand) vs. Superior Plus Corp | Esso (Thailand) vs. SIVERS SEMICONDUCTORS AB | Esso (Thailand) vs. Norsk Hydro ASA | Esso (Thailand) vs. Reliance Steel Aluminum |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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