Correlation Between Microsoft and Ocado Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ocado Group 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 Ocado Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ocado Group plc, you can compare the effects of market volatilities on Microsoft and Ocado Group 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 Ocado Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ocado Group.
Diversification Opportunities for Microsoft and Ocado Group
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Ocado is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ocado Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocado Group 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 Ocado Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocado Group plc has no effect on the direction of Microsoft i.e., Microsoft and Ocado Group go up and down completely randomly.
Pair Corralation between Microsoft and Ocado Group
Given the investment horizon of 90 days Microsoft is expected to generate 0.89 times more return on investment than Ocado Group. However, Microsoft is 1.13 times less risky than Ocado Group. It trades about -0.06 of its potential returns per unit of risk. Ocado Group plc is currently generating about -0.42 per unit of risk. If you would invest 42,375 in Microsoft on August 24, 2024 and sell it today you would lose (1,088) from holding Microsoft or give up 2.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Ocado Group plc
Performance |
| Timeline |
| Microsoft |
| Ocado Group plc |
Microsoft and Ocado Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ocado Group
The main advantage of trading using opposite Microsoft and Ocado Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ocado Group 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 Ocado Group will offset losses from the drop in Ocado Group's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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