Correlation Between Microsoft and BCWORLD PHARM

Can any of the company-specific risk be diversified away by investing in both Microsoft and BCWORLD PHARM 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 BCWORLD PHARM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and BCWORLD PHARM Co, you can compare the effects of market volatilities on Microsoft and BCWORLD PHARM 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 BCWORLD PHARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BCWORLD PHARM.

Diversification Opportunities for Microsoft and BCWORLD PHARM

-0.49

Correlation Coefficient

Microsoft  BCWORLD PHARM

Very good diversification

The 3 months correlation between Microsoft and BCWORLD is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BCWORLD PHARM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCWORLD PHARM 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 BCWORLD PHARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCWORLD PHARM has no effect on the direction of Microsoft i.e., Microsoft and BCWORLD PHARM go up and down completely randomly.

Pair Corralation between Microsoft and BCWORLD PHARM

Given the investment horizon of 90 days Microsoft is expected to generate 1.23 times less return on investment than BCWORLD PHARM. But when comparing it to its historical volatility, Microsoft is 2.88 times less risky than BCWORLD PHARM. It trades about 0.18 of its potential returns per unit of risk. BCWORLD PHARM Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  457,500  in BCWORLD PHARM Co on September 23, 2024 and sell it today you would earn a total of  22,500  from holding BCWORLD PHARM Co or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  BCWORLD PHARM Co

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BCWORLD PHARM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCWORLD PHARM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BCWORLD PHARM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and BCWORLD PHARM

The main advantage of trading using opposite Microsoft and BCWORLD PHARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BCWORLD PHARM 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 BCWORLD PHARM will offset losses from the drop in BCWORLD PHARM's long position.

The idea behind Microsoft and BCWORLD PHARM Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.