Correlation Between Microsoft and BIO UV
Can any of the company-specific risk be diversified away by investing in both Microsoft and BIO UV 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 BIO UV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BIO UV Group, you can compare the effects of market volatilities on Microsoft and BIO UV 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 BIO UV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BIO UV.
Diversification Opportunities for Microsoft and BIO UV
Very good diversification
The 3 months correlation between Microsoft and BIO is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BIO UV Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIO UV Group 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 BIO UV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIO UV Group has no effect on the direction of Microsoft i.e., Microsoft and BIO UV go up and down completely randomly.
Pair Corralation between Microsoft and BIO UV
Given the investment horizon of 90 days Microsoft is expected to generate 0.54 times more return on investment than BIO UV. However, Microsoft is 1.84 times less risky than BIO UV. It trades about 0.07 of its potential returns per unit of risk. BIO UV Group is currently generating about -0.05 per unit of risk. If you would invest 24,994 in Microsoft on November 30, 2024 and sell it today you would earn a total of 14,705 from holding Microsoft or generate 58.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.21% |
| Values | Daily Returns |
Microsoft vs. BIO UV Group
Performance |
| Timeline |
| Microsoft |
| BIO UV Group |
Microsoft and BIO UV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BIO UV
The main advantage of trading using opposite Microsoft and BIO UV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BIO UV 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 BIO UV will offset losses from the drop in BIO UV'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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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