Correlation Between Microsoft and Odyssean Investment

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

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

Diversification Opportunities for Microsoft and Odyssean Investment

-0.67

Correlation Coefficient

Microsoft  Odyssean Investment

Excellent diversification

The 3 months correlation between Microsoft and Odyssean is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Odyssean Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odyssean Investment Trust 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 Odyssean Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odyssean Investment Trust has no effect on the direction of Microsoft i.e., Microsoft and Odyssean Investment go up and down completely randomly.

Pair Corralation between Microsoft and Odyssean Investment

Assuming the 90 days trading horizon Microsoft is expected to generate 1.18 times more return on investment than Odyssean Investment. However, Microsoft is 1.18 times more volatile than Odyssean Investment Trust. It trades about 0.08 of its potential returns per unit of risk. Odyssean Investment Trust is currently generating about -0.23 per unit of risk. If you would invest  38,953  in Microsoft on September 23, 2024 and sell it today you would earn a total of  2,762  from holding Microsoft or generate 7.09% return on investment over 90 days.

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

Microsoft  vs.  Odyssean Investment Trust

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Odyssean Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Odyssean Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and Odyssean Investment

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

The idea behind Microsoft and Odyssean Investment Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.