Correlation Between Microsoft and Ollies Bargain

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

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

Diversification Opportunities for Microsoft and Ollies Bargain

0.56

Correlation Coefficient

Microsoft  Ollies Bargain

Very weak diversification

The 3 months correlation between Microsoft and Ollies is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ollies Bargain Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ollies Bargain Outlet 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 Ollies Bargain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ollies Bargain Outlet has no effect on the direction of Microsoft i.e., Microsoft and Ollies Bargain go up and down completely randomly.

Pair Corralation between Microsoft and Ollies Bargain

Given the investment horizon of 90 days Microsoft is expected to under-perform the Ollies Bargain. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.74 times less risky than Ollies Bargain. The stock trades about -0.11 of its potential returns per unit of risk. The Ollies Bargain Outlet is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,051  in Ollies Bargain Outlet on December 30, 2024 and sell it today you would earn a total of  273.00  from holding Ollies Bargain Outlet or generate 2.47% return on investment over 90 days.

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

Microsoft  vs.  Ollies Bargain Outlet

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.

Ollies Bargain Outlet

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ollies Bargain Outlet are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Ollies Bargain is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Microsoft and Ollies Bargain

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

The idea behind Microsoft and Ollies Bargain Outlet 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.