Correlation Between Microsoft Corp and Big Lots

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

Diversification Opportunities for Microsoft Corp and Big Lots

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Microsoft and Big Lots is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots 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 are associated (or correlated) with Big Lots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Lots has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Big Lots go up and down completely randomly.

Pair Corralation between Microsoft Corp and Big Lots

Given the investment horizon of 90 days Microsoft Corp is expected to generate 0.49 times more return on investment than Big Lots. However, Microsoft Corp is 2.03 times less risky than Big Lots. It trades about 0.0 of its potential returns per unit of risk. Big Lots is currently generating about -0.1 per unit of risk. If you would invest  27,569  in Microsoft Corp on April 5, 2022 and sell it today you would lose (1,611)  from holding Microsoft Corp or give up 5.84% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Big Lots

 Performance (%) 
      Timeline 
Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in August 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-09-08
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

Big Lots 
Big Lots Performance
0 of 100
Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in August 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0588
Payout Ratio
0.52
Last Split Factor
5:4
Forward Annual Dividend Rate
1.2
Dividend Date
2022-06-24
Ex Dividend Date
2022-06-09
Last Split Date
1997-06-25

Big Lots Price Channel

Microsoft Corp and Big Lots Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Microsoft Corp and Big Lots

The main advantage of trading using opposite Microsoft Corp and Big Lots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Big Lots 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 Big Lots will offset losses from the drop in Big Lots' long position.
The idea behind Microsoft Corp and Big Lots 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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