Correlation Between Microsoft and Petrus Resources
Can any of the company-specific risk be diversified away by investing in both Microsoft and Petrus Resources 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 Petrus Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Petrus Resources, you can compare the effects of market volatilities on Microsoft and Petrus Resources 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 Petrus Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Petrus Resources.
Diversification Opportunities for Microsoft and Petrus Resources
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Petrus is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Petrus Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrus Resources 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 Petrus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrus Resources has no effect on the direction of Microsoft i.e., Microsoft and Petrus Resources go up and down completely randomly.
Pair Corralation between Microsoft and Petrus Resources
Given the investment horizon of 90 days Microsoft is expected to generate 0.88 times more return on investment than Petrus Resources. However, Microsoft is 1.14 times less risky than Petrus Resources. It trades about 0.17 of its potential returns per unit of risk. Petrus Resources is currently generating about -0.07 per unit of risk. If you would invest 40,764 in Microsoft on September 3, 2024 and sell it today you would earn a total of 1,582 from holding Microsoft or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microsoft vs. Petrus Resources
Performance |
| Timeline |
| Microsoft |
| Petrus Resources |
Microsoft and Petrus Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Petrus Resources
The main advantage of trading using opposite Microsoft and Petrus Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Petrus Resources 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 Petrus Resources will offset losses from the drop in Petrus Resources' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Petrus Resources vs. InPlay Oil Corp | Petrus Resources vs. Yangarra Resources | Petrus Resources vs. Pine Cliff Energy |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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