Correlation Between Microsoft and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Microsoft and Bayerische Motoren 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 Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Bayerische Motoren Werke, you can compare the effects of market volatilities on Microsoft and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Bayerische Motoren.
Diversification Opportunities for Microsoft and Bayerische Motoren
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Bayerische is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Microsoft i.e., Microsoft and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Microsoft and Bayerische Motoren
Assuming the 90 days trading horizon Microsoft is expected to generate 0.99 times more return on investment than Bayerische Motoren. However, Microsoft is 1.01 times less risky than Bayerische Motoren. It trades about 0.09 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.03 per unit of risk. If you would invest 23,518 in Microsoft on August 27, 2024 and sell it today you would earn a total of 16,007 from holding Microsoft or generate 68.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Microsoft |
| Bayerische Motoren Werke |
Microsoft and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Bayerische Motoren
The main advantage of trading using opposite Microsoft and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| Microsoft vs. ALBIS LEASING AG | Microsoft vs. Sabra Health Care | Microsoft vs. National Health Investors | Microsoft vs. QBE Insurance Group |
| Bayerische Motoren vs. Check Point Software | Bayerische Motoren vs. DIVERSIFIED ROYALTY | Bayerische Motoren vs. Constellation Software | Bayerische Motoren vs. MAGIC SOFTWARE ENTR |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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