Correlation Between Microsoft and Socit BIC

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

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

Diversification Opportunities for Microsoft and Socit BIC

0.09

Correlation Coefficient

Microsoft  Socit BIC

Significant diversification

The 3 months correlation between Microsoft and Socit is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Socit BIC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit BIC SA 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 Socit BIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit BIC SA has no effect on the direction of Microsoft i.e., Microsoft and Socit BIC go up and down completely randomly.

Pair Corralation between Microsoft and Socit BIC

Given the investment horizon of 90 days Microsoft is expected to generate 1.4 times less return on investment than Socit BIC. But when comparing it to its historical volatility, Microsoft is 1.49 times less risky than Socit BIC. It trades about 0.05 of its potential returns per unit of risk. Socit BIC SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,020  in Socit BIC SA on September 3, 2024 and sell it today you would earn a total of  290.00  from holding Socit BIC SA or generate 4.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Socit BIC SA

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Socit BIC SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Socit BIC SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Socit BIC 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 Socit BIC

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

The idea behind Microsoft and Socit BIC SA 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.