# Correlation Between Microsoft Corp and Bip Investment

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Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Bip Investment 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 Corp and Bip Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and Bip Investment Corp, you can compare the effects of market volatilities on Microsoft Corp and Bip Investment 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 Corp with a short position of Bip Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Bip Investment.

## Diversification Opportunities for Microsoft Corp and Bip Investment

 0.31 Correlation Coefficient

### Weak diversification

The 3 months correlation between Microsoft and Bip is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Bip Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bip Investment Corp and Microsoft Corp 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 Corp CDR are associated (or correlated) with Bip Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bip Investment Corp has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Bip Investment go up and down completely randomly.

## Pair Corralation between Microsoft Corp and Bip Investment

Assuming the 90 days trading horizon Microsoft Corp CDR is expected to under-perform the Bip Investment. In addition to that, Microsoft Corp is 1.59 times more volatile than Bip Investment Corp. It trades about -0.3 of its total potential returns per unit of risk. Bip Investment Corp is currently generating about -0.03 per unit of volatility. If you would invest  2,550  in Bip Investment Corp on May 16, 2024 and sell it today you would lose (18.00) from holding Bip Investment Corp or give up 0.71% of portfolio value over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Very Weak Accuracy 100.0% Values Daily Returns

## Microsoft Corp CDR  vs.  Bip Investment Corp

 Performance
 Timeline
 Microsoft Corp CDR Correlation Profile

### 0 of 100

 Weak Strong
Very Weak
Over the last 90 days Microsoft Corp CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
 Performance Backtest Predict
 Bip Investment Corp Correlation Profile

### 7 of 100

 Weak Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bip Investment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Bip Investment is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
 Performance Backtest Predict

## Microsoft Corp and Bip Investment Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with Microsoft Corp and Bip Investment

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