Correlation Between MicroStrategy Incorporated and BC Technology

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

By analyzing existing cross correlation between MicroStrategy Incorporated and BC Technology Group, you can compare the effects of market volatilities on MicroStrategy Incorporated and BC Technology 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 MicroStrategy Incorporated with a short position of BC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroStrategy Incorporated and BC Technology.

Diversification Opportunities for MicroStrategy Incorporated and BC Technology

0.82

Correlation Coefficient

MicroStrategy Incorporated  BC Technology

Very poor diversification

The 3 months correlation between MicroStrategy and BCTCF is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and BC Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Technology Group and MicroStrategy Incorporated 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 MicroStrategy Incorporated are associated (or correlated) with BC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Technology Group has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and BC Technology go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and BC Technology

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to generate 0.82 times more return on investment than BC Technology. However, MicroStrategy Incorporated is 1.22 times less risky than BC Technology. It trades about 0.17 of its potential returns per unit of risk. BC Technology Group is currently generating about 0.12 per unit of risk. If you would invest  21,395  in MicroStrategy Incorporated on October 23, 2024 and sell it today you would earn a total of  17,515  from holding MicroStrategy Incorporated or generate 81.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

MicroStrategy Incorporated  vs.  BC Technology Group

MicroStrategy Incorporated

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

BC Technology Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BC Technology Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, BC Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroStrategy Incorporated and BC Technology

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

The idea behind MicroStrategy Incorporated and BC Technology Group 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..