Correlation Between Microsoft and ONEOK

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

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

Diversification Opportunities for Microsoft and ONEOK

0.1

Correlation Coefficient

Microsoft  ONEOK

Average diversification

The 3 months correlation between Microsoft and ONEOK is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Microsoft i.e., Microsoft and ONEOK go up and down completely randomly.

Pair Corralation between Microsoft and ONEOK

Given the investment horizon of 90 days Microsoft is expected to generate 0.94 times more return on investment than ONEOK. However, Microsoft is 1.06 times less risky than ONEOK. It trades about 0.09 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.08 per unit of risk. If you would invest  23,571  in Microsoft on September 22, 2024 and sell it today you would earn a total of  20,089  from holding Microsoft or generate 85.23% return on investment over 90 days.

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

Microsoft  vs.  ONEOK Inc

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

ONEOK Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ONEOK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and ONEOK

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

The idea behind Microsoft and ONEOK Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.