Correlation Between Microsoft and Bilfinger
Can any of the company-specific risk be diversified away by investing in both Microsoft and Bilfinger 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 Bilfinger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Bilfinger SE ADR, you can compare the effects of market volatilities on Microsoft and Bilfinger 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 Bilfinger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Bilfinger.
Diversification Opportunities for Microsoft and Bilfinger
Good diversification
The 3 months correlation between Microsoft and Bilfinger is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bilfinger SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilfinger SE ADR 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 Bilfinger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilfinger SE ADR has no effect on the direction of Microsoft i.e., Microsoft and Bilfinger go up and down completely randomly.
Pair Corralation between Microsoft and Bilfinger
Given the investment horizon of 90 days Microsoft is expected to generate 0.6 times more return on investment than Bilfinger. However, Microsoft is 1.68 times less risky than Bilfinger. It trades about 0.19 of its potential returns per unit of risk. Bilfinger SE ADR is currently generating about -0.32 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Bilfinger SE ADR
Performance |
| Timeline |
| Microsoft |
| Bilfinger SE ADR |
Microsoft and Bilfinger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Bilfinger
The main advantage of trading using opposite Microsoft and Bilfinger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Bilfinger 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 Bilfinger will offset losses from the drop in Bilfinger's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Bilfinger vs. Orion Group Holdings | Bilfinger vs. Agrify Corp | Bilfinger vs. Matrix Service Co | Bilfinger vs. MYR Group |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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