Correlation Between Microsoft and BlackRock Future

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

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

Diversification Opportunities for Microsoft and BlackRock Future

0.28

Correlation Coefficient

Microsoft  BlackRock Future

Modest diversification

The 3 months correlation between Microsoft and BlackRock is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BlackRock Future Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Future Health 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 BlackRock Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Future Health has no effect on the direction of Microsoft i.e., Microsoft and BlackRock Future go up and down completely randomly.

Pair Corralation between Microsoft and BlackRock Future

Given the investment horizon of 90 days Microsoft is expected to generate 1.35 times more return on investment than BlackRock Future. However, Microsoft is 1.35 times more volatile than BlackRock Future Health. It trades about 0.04 of its potential returns per unit of risk. BlackRock Future Health is currently generating about -0.04 per unit of risk. If you would invest  43,428  in Microsoft on September 17, 2024 and sell it today you would earn a total of  1,299  from holding Microsoft or generate 2.99% return on investment over 90 days.

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

Microsoft  vs.  BlackRock Future Health

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

BlackRock Future Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Future Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, BlackRock Future is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and BlackRock Future

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

The idea behind Microsoft and BlackRock Future Health 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.