Correlation Between BRIT AMER and Microsoft
Can any of the company-specific risk be diversified away by investing in both BRIT AMER and Microsoft 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 BRIT AMER and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and Microsoft, you can compare the effects of market volatilities on BRIT AMER and Microsoft 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 BRIT AMER with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and Microsoft.
Diversification Opportunities for BRIT AMER and Microsoft
Poor diversification
The 3 months correlation between BRIT and Microsoft is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of BRIT AMER i.e., BRIT AMER and Microsoft go up and down completely randomly.
Pair Corralation between BRIT AMER and Microsoft
Assuming the 90 days trading horizon BRIT AMER is expected to generate 3.84 times less return on investment than Microsoft. But when comparing it to its historical volatility, BRIT AMER TOBACCO is 1.29 times less risky than Microsoft. It trades about 0.03 of its potential returns per unit of risk. Microsoft is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 22,059 in Microsoft on October 13, 2024 and sell it today you would earn a total of 18,751 from holding Microsoft or generate 85.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
BRIT AMER TOBACCO vs. Microsoft
Performance |
Timeline |
BRIT AMER TOBACCO |
Microsoft |
BRIT AMER and Microsoft Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BRIT AMER and Microsoft
The main advantage of trading using opposite BRIT AMER and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.BRIT AMER vs. Singapore Telecommunications Limited | BRIT AMER vs. Ribbon Communications | BRIT AMER vs. Casio Computer CoLtd | BRIT AMER vs. CRISPR Therapeutics AG |
Microsoft vs. Take Two Interactive Software | Microsoft vs. BRIT AMER TOBACCO | Microsoft vs. Chesapeake Utilities | Microsoft vs. GBS Software AG |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |