Correlation Between Microsoft Corp and Exxon

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Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Exxon 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 Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp and Exxon Mobil Corp, you can compare the effects of market volatilities on Microsoft Corp and Exxon 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 Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Exxon.

Diversification Opportunities for Microsoft Corp and Exxon

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Microsoft and Exxon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Exxon go up and down completely randomly.

Pair Corralation between Microsoft Corp and Exxon

Given the investment horizon of 90 days Microsoft Corp is expected to generate 2.58 times less return on investment than Exxon. But when comparing it to its historical volatility, Microsoft Corp is 1.27 times less risky than Exxon. It trades about 0.04 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,911  in Exxon Mobil Corp on April 7, 2022 and sell it today you would earn a total of  4,570  from holding Exxon Mobil Corp or generate 116.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Exxon Mobil Corp

 Performance (%) 
      Timeline 
Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-09-08
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

Exxon Mobil Corp 
Exxon Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0402
Payout Ratio
0.52
Last Split Factor
2:1
Forward Annual Dividend Rate
3.52
Dividend Date
2022-06-10
Ex Dividend Date
2022-05-12
Last Split Date
2001-07-19

Exxon Price Channel

Microsoft Corp and Exxon Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Microsoft Corp and Exxon

The main advantage of trading using opposite Microsoft Corp and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
The idea behind Microsoft Corp and Exxon Mobil 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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