Correlation Between Microsoft and BYD Company
Can any of the company-specific risk be diversified away by investing in both Microsoft and BYD Company 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 BYD Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BYD Company Limited, you can compare the effects of market volatilities on Microsoft and BYD Company 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 BYD Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BYD Company.
Diversification Opportunities for Microsoft and BYD Company
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and BYD is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited 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 BYD Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Limited has no effect on the direction of Microsoft i.e., Microsoft and BYD Company go up and down completely randomly.
Pair Corralation between Microsoft and BYD Company
Given the investment horizon of 90 days Microsoft is expected to generate 4.68 times less return on investment than BYD Company. But when comparing it to its historical volatility, Microsoft is 2.2 times less risky than BYD Company. It trades about 0.05 of its potential returns per unit of risk. BYD Company Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,350 in BYD Company Limited on September 2, 2024 and sell it today you would earn a total of 1,000.00 from holding BYD Company Limited or generate 18.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.97% |
| Values | Daily Returns |
Microsoft vs. BYD Company Limited
Performance |
| Timeline |
| Microsoft |
| BYD Limited |
Microsoft and BYD Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BYD Company
The main advantage of trading using opposite Microsoft and BYD Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BYD Company 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 BYD Company will offset losses from the drop in BYD Company's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| BYD Company vs. Beyond Meat | BYD Company vs. Food Life Companies | BYD Company vs. Carsales | BYD Company vs. AUSTEVOLL SEAFOOD |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |