Correlation Between Microsoft and Oando PLC
Can any of the company-specific risk be diversified away by investing in both Microsoft and Oando PLC 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 Oando PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Oando PLC, you can compare the effects of market volatilities on Microsoft and Oando PLC 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 Oando PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Oando PLC.
Diversification Opportunities for Microsoft and Oando PLC
Significant diversification
The 3 months correlation between Microsoft and Oando is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Oando PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oando PLC 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 Oando PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oando PLC has no effect on the direction of Microsoft i.e., Microsoft and Oando PLC go up and down completely randomly.
Pair Corralation between Microsoft and Oando PLC
Given the investment horizon of 90 days Microsoft is expected to generate 8.44 times less return on investment than Oando PLC. But when comparing it to its historical volatility, Microsoft is 10.48 times less risky than Oando PLC. It trades about 0.09 of its potential returns per unit of risk. Oando PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,200 in Oando PLC on August 27, 2024 and sell it today you would earn a total of 1,800 from holding Oando PLC or generate 150.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.9% |
| Values | Daily Returns |
Microsoft vs. Oando PLC
Performance |
| Timeline |
| Microsoft |
| Oando PLC |
Microsoft and Oando PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Oando PLC
The main advantage of trading using opposite Microsoft and Oando PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Oando PLC 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 Oando PLC will offset losses from the drop in Oando PLC's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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