Correlation Between Microsoft and Angel Oak

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

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

Diversification Opportunities for Microsoft and Angel Oak

0.69

Correlation Coefficient

Microsoft  Angel Oak

Poor diversification

The 3 months correlation between Microsoft and Angel is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Angel Oak High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak High 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 Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak High has no effect on the direction of Microsoft i.e., Microsoft and Angel Oak go up and down completely randomly.

Pair Corralation between Microsoft and Angel Oak

Given the investment horizon of 90 days Microsoft is expected to generate 5.62 times more return on investment than Angel Oak. However, Microsoft is 5.62 times more volatile than Angel Oak High. It trades about 0.06 of its potential returns per unit of risk. Angel Oak High is currently generating about 0.09 per unit of risk. If you would invest  42,729  in Microsoft on October 25, 2024 and sell it today you would earn a total of  1,942  from holding Microsoft or generate 4.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Angel Oak High

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

Angel Oak High

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak High are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Angel Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Angel Oak

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

The idea behind Microsoft and Angel Oak High 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.