Correlation Between Microsoft and Build A
Can any of the company-specific risk be diversified away by investing in both Microsoft and Build A 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 Build A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Build A Bear Workshop, you can compare the effects of market volatilities on Microsoft and Build A 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 Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Build A.
Diversification Opportunities for Microsoft and Build A
Poor diversification
The 3 months correlation between Microsoft and Build is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear 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 Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of Microsoft i.e., Microsoft and Build A go up and down completely randomly.
Pair Corralation between Microsoft and Build A
Given the investment horizon of 90 days Microsoft is expected to under-perform the Build A. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.37 times less risky than Build A. The stock trades about -0.14 of its potential returns per unit of risk. The Build A Bear Workshop is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,943 in Build A Bear Workshop on January 26, 2024 and sell it today you would earn a total of 33.00 from holding Build A Bear Workshop or generate 1.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Microsoft vs. Build A Bear Workshop
Performance |
Timeline |
Microsoft |
Build A Bear |
Microsoft and Build A Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Build A
The main advantage of trading using opposite Microsoft and Build A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Build A 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 Build A will offset losses from the drop in Build A's long position.Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |