Correlation Between Microsoft and Phillips

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

By analyzing existing cross correlation between Microsoft and Phillips 66, you can compare the effects of market volatilities on Microsoft and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Phillips.

Diversification Opportunities for Microsoft and Phillips

-0.29

Correlation Coefficient

Microsoft  Phillips

Very good diversification

The 3 months correlation between Microsoft and Phillips is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Microsoft i.e., Microsoft and Phillips go up and down completely randomly.

Pair Corralation between Microsoft and Phillips

Given the investment horizon of 90 days Microsoft is expected to generate 0.71 times more return on investment than Phillips. However, Microsoft is 1.41 times less risky than Phillips. It trades about 0.05 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.01 per unit of risk. If you would invest  40,463  in Microsoft on June 30, 2025 and sell it today you would earn a total of  10,683  from holding Microsoft or generate 26.4% return on investment over 90 days.

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

Microsoft  vs.  Phillips 66

Microsoft

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Phillips 66

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Phillips showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Phillips

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

The idea behind Microsoft and Phillips 66 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.

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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.