Correlation Between Microsoft and Open Text
Can any of the company-specific risk be diversified away by investing in both Microsoft and Open Text 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 Open Text into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Open Text Corp, you can compare the effects of market volatilities on Microsoft and Open Text 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 Open Text. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Open Text.
Diversification Opportunities for Microsoft and Open Text
Weak diversification
The 3 months correlation between Microsoft and Open is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Open Text Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text Corp 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 Open Text. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text Corp has no effect on the direction of Microsoft i.e., Microsoft and Open Text go up and down completely randomly.
Pair Corralation between Microsoft and Open Text
Given the investment horizon of 90 days Microsoft is expected to generate 0.82 times more return on investment than Open Text. However, Microsoft is 1.23 times less risky than Open Text. It trades about 0.08 of its potential returns per unit of risk. Open Text Corp is currently generating about 0.02 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 16,632 from holding Microsoft or generate 67.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. Open Text Corp
Performance |
| Timeline |
| Microsoft |
| Open Text Corp |
Microsoft and Open Text Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Open Text
The main advantage of trading using opposite Microsoft and Open Text positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Open Text 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 Open Text will offset losses from the drop in Open Text's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Open Text vs. High Liner Foods | Open Text vs. SalesforceCom CDR | Open Text vs. Hemisphere Energy | Open Text vs. Verizon Communications CDR |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |