Correlation Between Microsoft and Optex Systems

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

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

Diversification Opportunities for Microsoft and Optex Systems

0.79

Correlation Coefficient

Microsoft  Optex Systems

Poor diversification

The 3 months correlation between Microsoft and Optex is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Optex Systems Holdings, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optex Systems Holdings, 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 Optex Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optex Systems Holdings, has no effect on the direction of Microsoft i.e., Microsoft and Optex Systems go up and down completely randomly.

Pair Corralation between Microsoft and Optex Systems

Given the investment horizon of 90 days Microsoft is expected to generate 0.68 times more return on investment than Optex Systems. However, Microsoft is 1.48 times less risky than Optex Systems. It trades about -0.08 of its potential returns per unit of risk. Optex Systems Holdings, is currently generating about -0.1 per unit of risk. If you would invest  42,398  in Microsoft on December 29, 2024 and sell it today you would lose (3,340) from holding Microsoft or give up 7.88% of portfolio value over 90 days.

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

Microsoft  vs.  Optex Systems Holdings,

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.

Optex Systems Holdings,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optex Systems Holdings, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Optex Systems

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

The idea behind Microsoft and Optex Systems Holdings, 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.