Correlation Between Microsoft and Bank Ozk

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

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

Diversification Opportunities for Microsoft and Bank Ozk

0.18

Correlation Coefficient

Microsoft  Bank Ozk

Average diversification

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

Pair Corralation between Microsoft and Bank Ozk

Given the investment horizon of 90 days Microsoft is expected to under-perform the Bank Ozk. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.35 times less risky than Bank Ozk. The stock trades about -0.11 of its potential returns per unit of risk. The Bank Ozk is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,402  in Bank Ozk on December 28, 2024 and sell it today you would lose (13.50) from holding Bank Ozk or give up 0.31% of portfolio value over 90 days.

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

Microsoft  vs.  Bank Ozk

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.

Bank Ozk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Ozk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Bank Ozk is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and Bank Ozk

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

The idea behind Microsoft and Bank Ozk 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.