Correlation Between Microsoft and Chevron Corp

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

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

Diversification Opportunities for Microsoft and Chevron Corp

0.88

Correlation Coefficient

Microsoft  Chevron Corp

Very poor diversification

The 3 months correlation between Microsoft and Chevron is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Microsoft i.e., Microsoft and Chevron Corp go up and down completely randomly.

Pair Corralation between Microsoft and Chevron Corp

Given the investment horizon of 90 days Microsoft is expected to generate 1.63 times less return on investment than Chevron Corp. But when comparing it to its historical volatility, Microsoft is 1.27 times less risky than Chevron Corp. It trades about 0.17 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  13,452  in Chevron Corp on May 28, 2025 and sell it today you would earn a total of  2,366  from holding Chevron Corp or generate 17.59% return on investment over 90 days.

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

Microsoft  vs.  Chevron Corp

Microsoft

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Chevron Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Chevron Corp

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

The idea behind Microsoft and Chevron Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.