Correlation Between Microsoft and BLUELINX HLDGS

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

By analyzing existing cross correlation between Microsoft and BLUELINX HLDGS DL 01, you can compare the effects of market volatilities on Microsoft and BLUELINX HLDGS 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 BLUELINX HLDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BLUELINX HLDGS.

Diversification Opportunities for Microsoft and BLUELINX HLDGS

0.29

Correlation Coefficient

Microsoft  BLUELINX HLDGS

Modest diversification

The 3 months correlation between Microsoft and BLUELINX is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BLUELINX HLDGS DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLUELINX HLDGS DL 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 BLUELINX HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLUELINX HLDGS DL has no effect on the direction of Microsoft i.e., Microsoft and BLUELINX HLDGS go up and down completely randomly.

Pair Corralation between Microsoft and BLUELINX HLDGS

Given the investment horizon of 90 days Microsoft is expected to generate 3.66 times less return on investment than BLUELINX HLDGS. But when comparing it to its historical volatility, Microsoft is 2.31 times less risky than BLUELINX HLDGS. It trades about 0.04 of its potential returns per unit of risk. BLUELINX HLDGS DL 01 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,400  in BLUELINX HLDGS DL 01 on September 22, 2024 and sell it today you would earn a total of  800.00  from holding BLUELINX HLDGS DL 01 or generate 8.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.56%
Values	Daily Returns

Microsoft  vs.  BLUELINX HLDGS DL 01

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.

BLUELINX HLDGS DL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BLUELINX HLDGS DL 01 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, BLUELINX HLDGS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and BLUELINX HLDGS

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

The idea behind Microsoft and BLUELINX HLDGS DL 01 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.