Correlation Between Microsoft and Boston Trust
Can any of the company-specific risk be diversified away by investing in both Microsoft and Boston Trust 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 Boston Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Boston Trust Midcap, you can compare the effects of market volatilities on Microsoft and Boston Trust 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 Boston Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Boston Trust.
Diversification Opportunities for Microsoft and Boston Trust
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Boston is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Boston Trust Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Midcap 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 Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Midcap has no effect on the direction of Microsoft i.e., Microsoft and Boston Trust go up and down completely randomly.
Pair Corralation between Microsoft and Boston Trust
Given the investment horizon of 90 days Microsoft is expected to under-perform the Boston Trust. In addition to that, Microsoft is 3.17 times more volatile than Boston Trust Midcap. It trades about -0.01 of its total potential returns per unit of risk. Boston Trust Midcap is currently generating about 0.29 per unit of volatility. If you would invest 2,418 in Boston Trust Midcap on November 3, 2024 and sell it today you would earn a total of 93.00 from holding Boston Trust Midcap or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Boston Trust Midcap
Performance |
| Timeline |
| Microsoft |
| Boston Trust Midcap |
Microsoft and Boston Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Boston Trust
The main advantage of trading using opposite Microsoft and Boston Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Boston Trust 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 Boston Trust will offset losses from the drop in Boston Trust's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Boston Trust vs. Boston Trust Asset | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Boston Trust Small |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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