Correlation Between Boyd Gaming and Microsoft

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

By analyzing existing cross correlation between Boyd Gaming and Microsoft, you can compare the effects of market volatilities on Boyd Gaming and Microsoft 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 Boyd Gaming with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Gaming and Microsoft.

Diversification Opportunities for Boyd Gaming and Microsoft

0.6

Correlation Coefficient

Boyd Gaming  Microsoft

Poor diversification

The 3 months correlation between Boyd and Microsoft is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Boyd Gaming 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 Boyd Gaming are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Boyd Gaming i.e., Boyd Gaming and Microsoft go up and down completely randomly.

Pair Corralation between Boyd Gaming and Microsoft

Assuming the 90 days trading horizon Boyd Gaming is expected to generate 1.02 times more return on investment than Microsoft. However, Boyd Gaming is 1.02 times more volatile than Microsoft. It trades about -0.08 of its potential returns per unit of risk. Microsoft is currently generating about -0.15 per unit of risk. If you would invest  6,832  in Boyd Gaming on December 24, 2024 and sell it today you would lose (632.00) from holding Boyd Gaming or give up 9.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Boyd Gaming  vs.  Microsoft

Boyd Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Boyd Gaming and Microsoft

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

The idea behind Boyd Gaming and Microsoft 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.