Correlation Between Microsoft and OBIC CoLtd

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

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

Diversification Opportunities for Microsoft and OBIC CoLtd

0.05

Correlation Coefficient

Microsoft  OBIC CoLtd

Significant diversification

The 3 months correlation between Microsoft and OBIC is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and OBIC CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBIC CoLtd 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 OBIC CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBIC CoLtd has no effect on the direction of Microsoft i.e., Microsoft and OBIC CoLtd go up and down completely randomly.

Pair Corralation between Microsoft and OBIC CoLtd

Given the investment horizon of 90 days Microsoft is expected to generate 1.93 times less return on investment than OBIC CoLtd. But when comparing it to its historical volatility, Microsoft is 1.28 times less risky than OBIC CoLtd. It trades about 0.02 of its potential returns per unit of risk. OBIC CoLtd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,720  in OBIC CoLtd on October 7, 2024 and sell it today you would earn a total of  160.00  from holding OBIC CoLtd or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Microsoft  vs.  OBIC CoLtd

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

OBIC CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OBIC CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, OBIC CoLtd 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 OBIC CoLtd

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

The idea behind Microsoft and OBIC CoLtd 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.