Correlation Between Microsoft and Deep Well

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

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

Diversification Opportunities for Microsoft and Deep Well

0.0

Correlation Coefficient

Microsoft  Deep Well

Pay attention - limited upside

The 3 months correlation between Microsoft and Deep is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Deep Well Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Well Oil 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 Deep Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Well Oil has no effect on the direction of Microsoft i.e., Microsoft and Deep Well go up and down completely randomly.

Pair Corralation between Microsoft and Deep Well

If you would invest (100.00) in Deep Well Oil on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Deep Well Oil or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Deep Well Oil

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.

Deep Well Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deep Well Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Deep Well is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Deep Well

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

The idea behind Microsoft and Deep Well Oil 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.