Correlation Between Microsoft and B3 SA

Can any of the company-specific risk be diversified away by investing in both Microsoft and B3 SA 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 B3 SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and B3 SA , you can compare the effects of market volatilities on Microsoft and B3 SA 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 B3 SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and B3 SA.

Diversification Opportunities for Microsoft and B3 SA

-0.67

Correlation Coefficient

Microsoft  B3 SA

Excellent diversification

The 3 months correlation between Microsoft and B3SA3 is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and B3 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B3 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 B3 SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B3 SA has no effect on the direction of Microsoft i.e., Microsoft and B3 SA go up and down completely randomly.

Pair Corralation between Microsoft and B3 SA

Assuming the 90 days trading horizon Microsoft is expected to under-perform the B3 SA. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.24 times less risky than B3 SA. The stock trades about -0.13 of its potential returns per unit of risk. The B3 SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  937.00  in B3 SA on December 2, 2024 and sell it today you would earn a total of  103.00  from holding B3 SA or generate 10.99% return on investment over 90 days.

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

Microsoft  vs.  B3 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. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

B3 SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B3 SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, B3 SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Microsoft and B3 SA

The main advantage of trading using opposite Microsoft and B3 SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, B3 SA 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 B3 SA will offset losses from the drop in B3 SA's long position.

The idea behind Microsoft and B3 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.