Correlation Between Microsoft and Oak Ridge
Can any of the company-specific risk be diversified away by investing in both Microsoft and Oak Ridge 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 Oak Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Oak Ridge Small, you can compare the effects of market volatilities on Microsoft and Oak Ridge 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 Oak Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Oak Ridge.
Diversification Opportunities for Microsoft and Oak Ridge
Average diversification
The 3 months correlation between Microsoft and OAK is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Oak Ridge Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Small 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 Oak Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Ridge Small has no effect on the direction of Microsoft i.e., Microsoft and Oak Ridge go up and down completely randomly.
Pair Corralation between Microsoft and Oak Ridge
Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than Oak Ridge. However, Microsoft is 1.46 times less risky than Oak Ridge. It trades about 0.08 of its potential returns per unit of risk. Oak Ridge Small is currently generating about 0.01 per unit of risk. If you would invest 24,616 in Microsoft on August 24, 2024 and sell it today you would earn a total of 17,084 from holding Microsoft or generate 69.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Oak Ridge Small
Performance |
| Timeline |
| Microsoft |
| Oak Ridge Small |
Microsoft and Oak Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Oak Ridge
The main advantage of trading using opposite Microsoft and Oak Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Oak Ridge 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 Oak Ridge will offset losses from the drop in Oak Ridge's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Oak Ridge vs. Blackrock Moderate Prepared | Oak Ridge vs. Saat Moderate Strategy | Oak Ridge vs. Wisdomtree Siegel Moderate | Oak Ridge vs. Calvert Moderate Allocation |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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