Correlation Between Microsoft and Brookfield Business

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

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

Diversification Opportunities for Microsoft and Brookfield Business

-0.46

Correlation Coefficient

Microsoft  Brookfield Business

Very good diversification

The 3 months correlation between Microsoft and Brookfield is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business 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 Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business has no effect on the direction of Microsoft i.e., Microsoft and Brookfield Business go up and down completely randomly.

Pair Corralation between Microsoft and Brookfield Business

Given the investment horizon of 90 days Microsoft is expected to under-perform the Brookfield Business. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.25 times less risky than Brookfield Business. The stock trades about -0.11 of its potential returns per unit of risk. The Brookfield Business Partners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,165  in Brookfield Business Partners on December 30, 2024 and sell it today you would earn a total of  271.00  from holding Brookfield Business Partners or generate 8.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Microsoft  vs.  Brookfield Business Partners

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Brookfield Business

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Brookfield Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and Brookfield Business

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

The idea behind Microsoft and Brookfield Business Partners 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.