Correlation Between Microsoft and BBTV Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and BBTV Holdings 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 BBTV Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BBTV Holdings, you can compare the effects of market volatilities on Microsoft and BBTV Holdings 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 BBTV Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BBTV Holdings.
Diversification Opportunities for Microsoft and BBTV Holdings
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and BBTV is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BBTV Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBTV Holdings 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 BBTV Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBTV Holdings has no effect on the direction of Microsoft i.e., Microsoft and BBTV Holdings go up and down completely randomly.
Pair Corralation between Microsoft and BBTV Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 2.53 times less return on investment than BBTV Holdings. But when comparing it to its historical volatility, Microsoft is 5.0 times less risky than BBTV Holdings. It trades about 0.06 of its potential returns per unit of risk. BBTV Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 26.00 in BBTV Holdings on August 31, 2024 and sell it today you would earn a total of 0.00 from holding BBTV Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.56% |
| Values | Daily Returns |
Microsoft vs. BBTV Holdings
Performance |
| Timeline |
| Microsoft |
| BBTV Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and BBTV Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BBTV Holdings
The main advantage of trading using opposite Microsoft and BBTV Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BBTV Holdings 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 BBTV Holdings will offset losses from the drop in BBTV Holdings' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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