Correlation Between Microsoft and OPERA SOFTWARE
Can any of the company-specific risk be diversified away by investing in both Microsoft and OPERA SOFTWARE 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 OPERA SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and OPERA SOFTWARE, you can compare the effects of market volatilities on Microsoft and OPERA SOFTWARE 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 OPERA SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and OPERA SOFTWARE.
Diversification Opportunities for Microsoft and OPERA SOFTWARE
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Microsoft and OPERA is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and OPERA SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPERA SOFTWARE 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 OPERA SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPERA SOFTWARE has no effect on the direction of Microsoft i.e., Microsoft and OPERA SOFTWARE go up and down completely randomly.
Pair Corralation between Microsoft and OPERA SOFTWARE
Assuming the 90 days trading horizon Microsoft is expected to generate 1.97 times less return on investment than OPERA SOFTWARE. But when comparing it to its historical volatility, Microsoft is 1.36 times less risky than OPERA SOFTWARE. It trades about 0.21 of its potential returns per unit of risk. OPERA SOFTWARE is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 70.00 in OPERA SOFTWARE on April 10, 2025 and sell it today you would earn a total of 37.00 from holding OPERA SOFTWARE or generate 52.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. OPERA SOFTWARE
Performance |
Timeline |
Microsoft |
OPERA SOFTWARE |
Microsoft and OPERA SOFTWARE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and OPERA SOFTWARE
The main advantage of trading using opposite Microsoft and OPERA SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, OPERA SOFTWARE 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 OPERA SOFTWARE will offset losses from the drop in OPERA SOFTWARE's long position.Microsoft vs. United Airlines Holdings | Microsoft vs. Australian Agricultural | Microsoft vs. SINGAPORE AIRLINES | Microsoft vs. DAIRY FARM INTL |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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