Correlation Between Western Energy and Microsoft
Can any of the company-specific risk be diversified away by investing in both Western Energy 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 Western Energy and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Energy Services and Microsoft, you can compare the effects of market volatilities on Western Energy 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 Western Energy with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Energy and Microsoft.
Diversification Opportunities for Western Energy and Microsoft
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Microsoft is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Western Energy Services and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Western Energy 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 Western Energy Services 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 Western Energy i.e., Western Energy and Microsoft go up and down completely randomly.
Pair Corralation between Western Energy and Microsoft
Assuming the 90 days horizon Western Energy Services is expected to generate 0.11 times more return on investment than Microsoft. However, Western Energy Services is 9.45 times less risky than Microsoft. It trades about -0.22 of its potential returns per unit of risk. Microsoft is currently generating about -0.17 per unit of risk. If you would invest 202.00 in Western Energy Services on January 25, 2024 and sell it today you would lose (1.00) from holding Western Energy Services or give up 0.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Energy Services vs. Microsoft
Performance |
| Timeline |
| Western Energy Services |
| Microsoft |
Western Energy and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Energy and Microsoft
The main advantage of trading using opposite Western Energy and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Energy 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.| Western Energy vs. Indo Tambangraya Megah | Western Energy vs. Bukit Asam Tbk | Western Energy vs. Geo Energy Resources | Western Energy vs. Yancoal Australia |
| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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