Correlation Between Microsoft and BHP
Can any of the company-specific risk be diversified away by investing in both Microsoft and BHP 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 BHP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BHP Group, you can compare the effects of market volatilities on Microsoft and BHP 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 BHP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BHP.
Diversification Opportunities for Microsoft and BHP
Pay attention - limited upside
The 3 months correlation between Microsoft and BHP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP 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 BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of Microsoft i.e., Microsoft and BHP go up and down completely randomly.
Pair Corralation between Microsoft and BHP
If you would invest 24,843 in Microsoft on September 2, 2024 and sell it today you would earn a total of 17,503 from holding Microsoft or generate 70.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Microsoft vs. BHP Group
Performance |
| Timeline |
| Microsoft |
| BHP Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and BHP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BHP
The main advantage of trading using opposite Microsoft and BHP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BHP 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 BHP will offset losses from the drop in BHP'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 CEOs Directory module to screen CEOs from public companies around the world.
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