Correlation Between Microsoft and Blue Moon
Can any of the company-specific risk be diversified away by investing in both Microsoft and Blue Moon 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 Blue Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Blue Moon Metals, you can compare the effects of market volatilities on Microsoft and Blue Moon 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 Blue Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Blue Moon.
Diversification Opportunities for Microsoft and Blue Moon
Modest diversification
The 3 months correlation between Microsoft and Blue is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Blue Moon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Moon Metals 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 Blue Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Moon Metals has no effect on the direction of Microsoft i.e., Microsoft and Blue Moon go up and down completely randomly.
Pair Corralation between Microsoft and Blue Moon
Given the investment horizon of 90 days Microsoft is expected to generate 18.95 times less return on investment than Blue Moon. But when comparing it to its historical volatility, Microsoft is 30.13 times less risky than Blue Moon. It trades about 0.09 of its potential returns per unit of risk. Blue Moon Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Blue Moon Metals on August 27, 2024 and sell it today you would earn a total of 9.00 from holding Blue Moon Metals or generate 60.0% 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. Blue Moon Metals
Performance |
| Timeline |
| Microsoft |
| Blue Moon Metals |
Microsoft and Blue Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Blue Moon
The main advantage of trading using opposite Microsoft and Blue Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Blue Moon 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 Blue Moon will offset losses from the drop in Blue Moon's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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