Correlation Between Microsoft and OppFi
Can any of the company-specific risk be diversified away by investing in both Microsoft and OppFi 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 OppFi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and OppFi Inc, you can compare the effects of market volatilities on Microsoft and OppFi 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 OppFi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and OppFi.
Diversification Opportunities for Microsoft and OppFi
Significant diversification
The 3 months correlation between Microsoft and OppFi is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and OppFi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OppFi 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 OppFi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OppFi Inc has no effect on the direction of Microsoft i.e., Microsoft and OppFi go up and down completely randomly.
Pair Corralation between Microsoft and OppFi
Given the investment horizon of 90 days Microsoft is expected to under-perform the OppFi. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.31 times less risky than OppFi. The stock trades about -0.04 of its potential returns per unit of risk. The OppFi Inc is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 524.00 in OppFi Inc on August 31, 2024 and sell it today you would earn a total of 274.00 from holding OppFi Inc or generate 52.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. OppFi Inc
Performance |
| Timeline |
| Microsoft |
| OppFi Inc |
Microsoft and OppFi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and OppFi
The main advantage of trading using opposite Microsoft and OppFi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, OppFi 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 OppFi will offset losses from the drop in OppFi's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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