Correlation Between PENINSULA ENERG and Microsoft

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

By analyzing existing cross correlation between PENINSULA ENERG and Microsoft, you can compare the effects of market volatilities on PENINSULA ENERG and Microsoft 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 PENINSULA ENERG with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENINSULA ENERG and Microsoft.

Diversification Opportunities for PENINSULA ENERG and Microsoft

-0.77

Correlation Coefficient

PENINSULA ENERG  Microsoft

Pay attention - limited upside

The 3 months correlation between PENINSULA and Microsoft is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding PENINSULA ENERG and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and PENINSULA ENERG 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 PENINSULA ENERG are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of PENINSULA ENERG i.e., PENINSULA ENERG and Microsoft go up and down completely randomly.

Pair Corralation between PENINSULA ENERG and Microsoft

Assuming the 90 days trading horizon PENINSULA ENERG is expected to under-perform the Microsoft. In addition to that, PENINSULA ENERG is 4.5 times more volatile than Microsoft. It trades about -0.04 of its total potential returns per unit of risk. Microsoft is currently generating about 0.11 per unit of volatility. If you would invest  38,723  in Microsoft on September 18, 2024 and sell it today you would earn a total of  3,952  from holding Microsoft or generate 10.21% return on investment over 90 days.

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

PENINSULA ENERG  vs.  Microsoft

PENINSULA ENERG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENINSULA ENERG 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 primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PENINSULA ENERG and Microsoft

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

The idea behind PENINSULA ENERG and Microsoft 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.

Check out your portfolio center.

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.