Correlation Between Microsoft Corp and Chevron Corp

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp 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 Corp 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 Corp and Chevron Corp, you can compare the effects of market volatilities on Microsoft Corp 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 Corp with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Chevron Corp.

Diversification Opportunities for Microsoft Corp and Chevron Corp

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Microsoft and Chevron is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Microsoft Corp 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 Corp 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 Corp i.e., Microsoft Corp and Chevron Corp go up and down completely randomly.

Pair Corralation between Microsoft Corp and Chevron Corp

Given the investment horizon of 90 days Microsoft Corp is expected to generate 0.8 times more return on investment than Chevron Corp. However, Microsoft Corp is 1.26 times less risky than Chevron Corp. It trades about 0.33 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.22 per unit of risk. If you would invest  25,425  in Microsoft Corp on May 18, 2022 and sell it today you would earn a total of  3,846  from holding Microsoft Corp or generate 15.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Chevron Corp

 Performance (%) 
       Timeline  
Microsoft Corp 
Microsoft Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish technical and fundamental indicators, Microsoft Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft Price Channel

Chevron Corp 
Chevron Performance
0 of 100
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

Microsoft Corp and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and Chevron Corp

The main advantage of trading using opposite Microsoft Corp and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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 Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

Other Complementary Tools

Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Go
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go