Correlation Between Microsoft and Inpex Corp

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

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

Diversification Opportunities for Microsoft and Inpex Corp

-0.68

Correlation Coefficient

Microsoft  Inpex Corp

Excellent diversification

The 3 months correlation between Microsoft and Inpex is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Inpex Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inpex Corp ADR 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 Inpex Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inpex Corp ADR has no effect on the direction of Microsoft i.e., Microsoft and Inpex Corp go up and down completely randomly.

Pair Corralation between Microsoft and Inpex Corp

Given the investment horizon of 90 days Microsoft is expected to under-perform the Inpex Corp. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.04 times less risky than Inpex Corp. The stock trades about -0.11 of its potential returns per unit of risk. The Inpex Corp ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,275  in Inpex Corp ADR on December 30, 2024 and sell it today you would earn a total of  114.00  from holding Inpex Corp ADR or generate 8.94% return on investment over 90 days.

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

Microsoft  vs.  Inpex Corp ADR

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.

Inpex Corp ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inpex Corp ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Inpex Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and Inpex Corp

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

The idea behind Microsoft and Inpex Corp ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.