Correlation Between Microsoft and PXP Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and PXP Energy 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 PXP Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PXP Energy Corp, you can compare the effects of market volatilities on Microsoft and PXP Energy 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 PXP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PXP Energy.
Diversification Opportunities for Microsoft and PXP Energy
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and PXP is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PXP Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PXP Energy 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 PXP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PXP Energy Corp has no effect on the direction of Microsoft i.e., Microsoft and PXP Energy go up and down completely randomly.
Pair Corralation between Microsoft and PXP Energy
Given the investment horizon of 90 days Microsoft is expected to generate 0.63 times more return on investment than PXP Energy. However, Microsoft is 1.59 times less risky than PXP Energy. It trades about 0.19 of its potential returns per unit of risk. PXP Energy Corp is currently generating about -0.27 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. PXP Energy Corp
Performance |
| Timeline |
| Microsoft |
| PXP Energy Corp |
Microsoft and PXP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PXP Energy
The main advantage of trading using opposite Microsoft and PXP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PXP Energy 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 PXP Energy will offset losses from the drop in PXP Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| PXP Energy vs. SM Investments Corp | PXP Energy vs. San Miguel Pure | PXP Energy vs. Ayala Corp | PXP Energy vs. Ayala Land |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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