Correlation Between Microsoft and BlackBerry
Can any of the company-specific risk be diversified away by investing in both Microsoft and BlackBerry 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 BlackBerry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BlackBerry, you can compare the effects of market volatilities on Microsoft and BlackBerry 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 BlackBerry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BlackBerry.
Diversification Opportunities for Microsoft and BlackBerry
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and BlackBerry is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry 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 BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of Microsoft i.e., Microsoft and BlackBerry go up and down completely randomly.
Pair Corralation between Microsoft and BlackBerry
Given the investment horizon of 90 days Microsoft is expected to under-perform the BlackBerry. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.77 times less risky than BlackBerry. The stock trades about -0.24 of its potential returns per unit of risk. The BlackBerry is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 262.00 in BlackBerry on January 20, 2024 and sell it today you would earn a total of 17.00 from holding BlackBerry or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. BlackBerry
Performance |
| Timeline |
| Microsoft |
| BlackBerry |
Microsoft and BlackBerry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BlackBerry
The main advantage of trading using opposite Microsoft and BlackBerry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BlackBerry 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 BlackBerry will offset losses from the drop in BlackBerry's long position.| Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
| BlackBerry vs. Block Inc | BlackBerry vs. Adobe Systems Incorporated | BlackBerry vs. Crowdstrike Holdings | BlackBerry vs. Cloudflare |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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