Correlation Between Microsoft and BTG Pactual

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

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

Diversification Opportunities for Microsoft and BTG Pactual

-0.92

Correlation Coefficient

Microsoft  BTG Pactual

Pay attention - limited upside

The 3 months correlation between Microsoft and BTG is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BTG Pactual Logstica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTG Pactual Logstica 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 BTG Pactual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTG Pactual Logstica has no effect on the direction of Microsoft i.e., Microsoft and BTG Pactual go up and down completely randomly.

Pair Corralation between Microsoft and BTG Pactual

Assuming the 90 days trading horizon Microsoft is expected to generate 1.01 times more return on investment than BTG Pactual. However, Microsoft is 1.01 times more volatile than BTG Pactual Logstica. It trades about 0.17 of its potential returns per unit of risk. BTG Pactual Logstica is currently generating about -0.05 per unit of risk. If you would invest  9,659  in Microsoft on September 27, 2024 and sell it today you would earn a total of  1,512  from holding Microsoft or generate 15.65% return on investment over 90 days.

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

Microsoft  vs.  BTG Pactual Logstica

Microsoft

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

BTG Pactual Logstica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTG Pactual Logstica has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong essential indicators, BTG Pactual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and BTG Pactual

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

The idea behind Microsoft and BTG Pactual Logstica 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.