Correlation Between Microsoft and Bitfarms
Can any of the company-specific risk be diversified away by investing in both Microsoft and Bitfarms 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 Bitfarms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Bitfarms, you can compare the effects of market volatilities on Microsoft and Bitfarms 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 Bitfarms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Bitfarms.
Diversification Opportunities for Microsoft and Bitfarms
Weak diversification
The 3 months correlation between Microsoft and Bitfarms is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bitfarms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitfarms 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 Bitfarms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitfarms has no effect on the direction of Microsoft i.e., Microsoft and Bitfarms go up and down completely randomly.
Pair Corralation between Microsoft and Bitfarms
Given the investment horizon of 90 days Microsoft is expected to under-perform the Bitfarms. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.62 times less risky than Bitfarms. The stock trades about -0.04 of its potential returns per unit of risk. The Bitfarms is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 214.00 in Bitfarms on August 31, 2024 and sell it today you would earn a total of 1.00 from holding Bitfarms or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Bitfarms
Performance |
| Timeline |
| Microsoft |
| Bitfarms |
Microsoft and Bitfarms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Bitfarms
The main advantage of trading using opposite Microsoft and Bitfarms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Bitfarms 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 Bitfarms will offset losses from the drop in Bitfarms' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Bitfarms vs. HIVE Blockchain Technologies | Bitfarms vs. CleanSpark | Bitfarms vs. Marathon Digital Holdings | Bitfarms vs. Riot Blockchain |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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