Correlation Between Microsoft and Bang Olufsen

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Microsoft and Bang Olufsen 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 Bang Olufsen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Bang Olufsen, you can compare the effects of market volatilities on Microsoft and Bang Olufsen 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 Bang Olufsen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Bang Olufsen.

Diversification Opportunities for Microsoft and Bang Olufsen

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Microsoft and Bang is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bang Olufsen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bang Olufsen 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 Bang Olufsen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bang Olufsen has no effect on the direction of Microsoft i.e., Microsoft and Bang Olufsen go up and down completely randomly.

Pair Corralation between Microsoft and Bang Olufsen

Given the investment horizon of 90 days Microsoft is expected to generate 0.59 times more return on investment than Bang Olufsen. However, Microsoft is 1.69 times less risky than Bang Olufsen. It trades about 0.18 of its potential returns per unit of risk. Bang Olufsen is currently generating about 0.05 per unit of risk. If you would invest  32,056  in Microsoft on December 29, 2023 and sell it today you would earn a total of  10,065  from holding Microsoft or generate 31.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.41%
ValuesDaily Returns

Microsoft  vs.  Bang Olufsen

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
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. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Bang Olufsen 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Bang Olufsen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Bang Olufsen is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Microsoft and Bang Olufsen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Bang Olufsen

The main advantage of trading using opposite Microsoft and Bang Olufsen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Bang Olufsen 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 Bang Olufsen will offset losses from the drop in Bang Olufsen's long position.
The idea behind Microsoft and Bang Olufsen 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

Other Complementary Tools

Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Bonds Directory
Find actively traded corporate debentures issued by US companies
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Earnings Calls
Check upcoming earnings announcements updated hourly across public exchanges
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated