Correlation Between Microsoft and Bonheur
Can any of the company-specific risk be diversified away by investing in both Microsoft and Bonheur 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 Bonheur into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Bonheur, you can compare the effects of market volatilities on Microsoft and Bonheur 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 Bonheur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Bonheur.
Diversification Opportunities for Microsoft and Bonheur
Modest diversification
The 3 months correlation between Microsoft and Bonheur is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bonheur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonheur 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 Bonheur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonheur has no effect on the direction of Microsoft i.e., Microsoft and Bonheur go up and down completely randomly.
Pair Corralation between Microsoft and Bonheur
Given the investment horizon of 90 days Microsoft is expected to generate 0.9 times more return on investment than Bonheur. However, Microsoft is 1.11 times less risky than Bonheur. It trades about 0.02 of its potential returns per unit of risk. Bonheur is currently generating about -0.05 per unit of risk. If you would invest 41,266 in Microsoft on August 25, 2024 and sell it today you would earn a total of 434.00 from holding Microsoft or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Microsoft vs. Bonheur
Performance |
| Timeline |
| Microsoft |
| Bonheur |
Microsoft and Bonheur Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Bonheur
The main advantage of trading using opposite Microsoft and Bonheur positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Bonheur 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 Bonheur will offset losses from the drop in Bonheur's 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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