Correlation Between Microsoft and Olo
Can any of the company-specific risk be diversified away by investing in both Microsoft and Olo 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 Olo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Olo Inc, you can compare the effects of market volatilities on Microsoft and Olo 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 Olo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Olo.
Diversification Opportunities for Microsoft and Olo
Good diversification
The 3 months correlation between Microsoft and Olo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Olo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olo Inc 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 Olo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olo Inc has no effect on the direction of Microsoft i.e., Microsoft and Olo go up and down completely randomly.
Pair Corralation between Microsoft and Olo
Given the investment horizon of 90 days Microsoft is expected to under-perform the Olo. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.13 times less risky than Olo. The stock trades about -0.04 of its potential returns per unit of risk. The Olo Inc is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 519.00 in Olo Inc on August 27, 2024 and sell it today you would earn a total of 206.00 from holding Olo Inc or generate 39.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Olo Inc
Performance |
| Timeline |
| Microsoft |
| Olo Inc |
Microsoft and Olo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Olo
The main advantage of trading using opposite Microsoft and Olo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Olo 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 Olo will offset losses from the drop in Olo's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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