Correlation Between Microsoft and Athabasca Oil

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

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

Diversification Opportunities for Microsoft and Athabasca Oil

0.04

Correlation Coefficient

Microsoft  Athabasca Oil

Significant diversification

The 3 months correlation between Microsoft and Athabasca is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Athabasca Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athabasca Oil 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 Athabasca Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athabasca Oil Corp has no effect on the direction of Microsoft i.e., Microsoft and Athabasca Oil go up and down completely randomly.

Pair Corralation between Microsoft and Athabasca Oil

Given the investment horizon of 90 days Microsoft is expected to generate 0.78 times more return on investment than Athabasca Oil. However, Microsoft is 1.28 times less risky than Athabasca Oil. It trades about -0.07 of its potential returns per unit of risk. Athabasca Oil Corp is currently generating about -0.06 per unit of risk. If you would invest  42,261  in Microsoft on November 29, 2024 and sell it today you would lose (3,008) from holding Microsoft or give up 7.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  Athabasca Oil Corp

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Athabasca Oil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Athabasca Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Microsoft and Athabasca Oil

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

The idea behind Microsoft and Athabasca Oil Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.