Correlation Between Microsoft and BizLink Holding
Can any of the company-specific risk be diversified away by investing in both Microsoft and BizLink Holding 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 BizLink Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BizLink Holding, you can compare the effects of market volatilities on Microsoft and BizLink Holding 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 BizLink Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BizLink Holding.
Diversification Opportunities for Microsoft and BizLink Holding
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and BizLink is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BizLink Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BizLink Holding 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 BizLink Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BizLink Holding has no effect on the direction of Microsoft i.e., Microsoft and BizLink Holding go up and down completely randomly.
Pair Corralation between Microsoft and BizLink Holding
Given the investment horizon of 90 days Microsoft is expected to under-perform the BizLink Holding. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.9 times less risky than BizLink Holding. The stock trades about -0.01 of its potential returns per unit of risk. The BizLink Holding is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 60,500 in BizLink Holding on November 3, 2024 and sell it today you would earn a total of 3,200 from holding BizLink Holding or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 76.19% |
| Values | Daily Returns |
Microsoft vs. BizLink Holding
Performance |
| Timeline |
| Microsoft |
| BizLink Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Microsoft and BizLink Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BizLink Holding
The main advantage of trading using opposite Microsoft and BizLink Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BizLink Holding 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 BizLink Holding will offset losses from the drop in BizLink Holding's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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