Correlation Between Microsoft and OptiNose

Can any of the company-specific risk be diversified away by investing in both Microsoft and OptiNose 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 OptiNose into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and OptiNose, you can compare the effects of market volatilities on Microsoft and OptiNose 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 OptiNose. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and OptiNose.

Diversification Opportunities for Microsoft and OptiNose

-0.19

Correlation Coefficient

Microsoft  OptiNose

Good diversification

The 3 months correlation between Microsoft and OptiNose is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and OptiNose in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OptiNose 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 OptiNose. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OptiNose has no effect on the direction of Microsoft i.e., Microsoft and OptiNose go up and down completely randomly.

Pair Corralation between Microsoft and OptiNose

Given the investment horizon of 90 days Microsoft is expected to generate 0.41 times more return on investment than OptiNose. However, Microsoft is 2.47 times less risky than OptiNose. It trades about -0.23 of its potential returns per unit of risk. OptiNose is currently generating about -0.53 per unit of risk. If you would invest  44,602  in Microsoft on October 8, 2024 and sell it today you would lose (2,267) from holding Microsoft or give up 5.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.21%
Values	Daily Returns

Microsoft  vs.  OptiNose

Microsoft

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

OptiNose

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OptiNose are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OptiNose reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and OptiNose

The main advantage of trading using opposite Microsoft and OptiNose positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, OptiNose 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 OptiNose will offset losses from the drop in OptiNose's long position.

The idea behind Microsoft and OptiNose pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .