Correlation Between Microsoft and Oriental Culture

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

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

Diversification Opportunities for Microsoft and Oriental Culture

-0.18

Correlation Coefficient

Microsoft  Oriental Culture

Good diversification

The 3 months correlation between Microsoft and Oriental is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Oriental Culture Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Culture Holding 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 Oriental Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Culture Holding has no effect on the direction of Microsoft i.e., Microsoft and Oriental Culture go up and down completely randomly.

Pair Corralation between Microsoft and Oriental Culture

Given the investment horizon of 90 days Microsoft is expected to generate 0.16 times more return on investment than Oriental Culture. However, Microsoft is 6.09 times less risky than Oriental Culture. It trades about 0.19 of its potential returns per unit of risk. Oriental Culture Holding is currently generating about -0.06 per unit of risk. If you would invest  40,554  in Microsoft on September 1, 2024 and sell it today you would earn a total of  1,792  from holding Microsoft or generate 4.42% return on investment over 90 days.

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

Microsoft  vs.  Oriental Culture Holding

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.

Oriental Culture Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Culture Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Oriental Culture reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Oriental Culture

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

The idea behind Microsoft and Oriental Culture Holding 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.