Correlation Between TOTAL GABON and Microsoft

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Can any of the company-specific risk be diversified away by investing in both TOTAL GABON 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 TOTAL GABON and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOTAL GABON and Microsoft, you can compare the effects of market volatilities on TOTAL GABON 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 TOTAL GABON with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOTAL GABON and Microsoft.

Diversification Opportunities for TOTAL GABON and Microsoft

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between TOTAL and Microsoft is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding TOTAL GABON and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and TOTAL GABON 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 TOTAL GABON 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 TOTAL GABON i.e., TOTAL GABON and Microsoft go up and down completely randomly.

Pair Corralation between TOTAL GABON and Microsoft

Assuming the 90 days trading horizon TOTAL GABON is expected to generate 1.36 times less return on investment than Microsoft. In addition to that, TOTAL GABON is 1.1 times more volatile than Microsoft. It trades about 0.06 of its total potential returns per unit of risk. Microsoft is currently generating about 0.08 per unit of volatility. If you would invest  23,076  in Microsoft on September 5, 2024 and sell it today you would earn a total of  17,714  from holding Microsoft or generate 76.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

TOTAL GABON  vs.  Microsoft

 Performance 
       Timeline  
TOTAL GABON 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL GABON are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TOTAL GABON exhibited solid returns over the last few months and may actually be approaching a breakup point.
Microsoft 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

TOTAL GABON and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TOTAL GABON and Microsoft

The main advantage of trading using opposite TOTAL GABON and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOTAL GABON 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 TOTAL GABON 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.

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