Correlation Between Microsoft and BTQ Technologies

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

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

Diversification Opportunities for Microsoft and BTQ Technologies

0.63

Correlation Coefficient

Microsoft  BTQ Technologies

Poor diversification

The 3 months correlation between Microsoft and BTQ is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BTQ Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTQ Technologies Corp 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 BTQ Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTQ Technologies Corp has no effect on the direction of Microsoft i.e., Microsoft and BTQ Technologies go up and down completely randomly.

Pair Corralation between Microsoft and BTQ Technologies

Given the investment horizon of 90 days Microsoft is expected to generate 28.28 times less return on investment than BTQ Technologies. But when comparing it to its historical volatility, Microsoft is 11.22 times less risky than BTQ Technologies. It trades about 0.05 of its potential returns per unit of risk. BTQ Technologies Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  31.00  in BTQ Technologies Corp on October 3, 2024 and sell it today you would earn a total of  307.00  from holding BTQ Technologies Corp or generate 990.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Microsoft  vs.  BTQ Technologies Corp

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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.

BTQ Technologies Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BTQ Technologies Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, BTQ Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and BTQ Technologies

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

The idea behind Microsoft and BTQ Technologies Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.