Correlation Between Microsoft and Body One

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

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

Diversification Opportunities for Microsoft and Body One

-0.57

Correlation Coefficient

Microsoft  Body One

Excellent diversification

The 3 months correlation between Microsoft and Body is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Body One SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Body One SA 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 Body One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Body One SA has no effect on the direction of Microsoft i.e., Microsoft and Body One go up and down completely randomly.

Pair Corralation between Microsoft and Body One

Given the investment horizon of 90 days Microsoft is expected to under-perform the Body One. In addition to that, Microsoft is 1.25 times more volatile than Body One SA. It trades about -0.14 of its total potential returns per unit of risk. Body One SA is currently generating about 0.13 per unit of volatility. If you would invest  32.00  in Body One SA on December 5, 2024 and sell it today you would earn a total of  3.00  from holding Body One SA or generate 9.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Microsoft  vs.  Body One SA

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Body One SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Body One SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Body One may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and Body One

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

The idea behind Microsoft and Body One SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.