Correlation Between Microsoft and Opter AB
Can any of the company-specific risk be diversified away by investing in both Microsoft and Opter AB 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 Opter AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Opter AB, you can compare the effects of market volatilities on Microsoft and Opter AB 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 Opter AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Opter AB.
Diversification Opportunities for Microsoft and Opter AB
Good diversification
The 3 months correlation between Microsoft and Opter is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Opter AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opter AB 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 Opter AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opter AB has no effect on the direction of Microsoft i.e., Microsoft and Opter AB go up and down completely randomly.
Pair Corralation between Microsoft and Opter AB
Given the investment horizon of 90 days Microsoft is expected to generate 6.79 times less return on investment than Opter AB. But when comparing it to its historical volatility, Microsoft is 1.53 times less risky than Opter AB. It trades about 0.03 of its potential returns per unit of risk. Opter AB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 9,960 in Opter AB on August 28, 2024 and sell it today you would earn a total of 1,890 from holding Opter AB or generate 18.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Microsoft vs. Opter AB
Performance |
| Timeline |
| Microsoft |
| Opter AB |
Microsoft and Opter AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Opter AB
The main advantage of trading using opposite Microsoft and Opter AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Opter AB 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 Opter AB will offset losses from the drop in Opter AB's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Opter AB vs. Sinch AB | Opter AB vs. Hexatronic Group AB | Opter AB vs. Samhllsbyggnadsbolaget i Norden | Opter AB vs. Storskogen Group AB |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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