Correlation Between Microsoft and BM Technologies
Can any of the company-specific risk be diversified away by investing in both Microsoft and BM Technologies 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 BM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BM Technologies WT, you can compare the effects of market volatilities on Microsoft and BM Technologies 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 BM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BM Technologies.
Diversification Opportunities for Microsoft and BM Technologies
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and BMTX-WT is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BM Technologies WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM Technologies WT 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 BM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM Technologies WT has no effect on the direction of Microsoft i.e., Microsoft and BM Technologies go up and down completely randomly.
Pair Corralation between Microsoft and BM Technologies
Given the investment horizon of 90 days Microsoft is expected to generate 611.06 times less return on investment than BM Technologies. But when comparing it to its historical volatility, Microsoft is 108.81 times less risky than BM Technologies. It trades about 0.03 of its potential returns per unit of risk. BM Technologies WT is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5.30 in BM Technologies WT on August 30, 2024 and sell it today you would earn a total of 35.70 from holding BM Technologies WT or generate 673.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 78.13% |
| Values | Daily Returns |
Microsoft vs. BM Technologies WT
Performance |
| Timeline |
| Microsoft |
| BM Technologies WT |
Microsoft and BM Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BM Technologies
The main advantage of trading using opposite Microsoft and BM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BM Technologies 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 BM Technologies will offset losses from the drop in BM Technologies' 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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