Correlation Between Microsoft and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fevertree Drinks 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 Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fevertree Drinks PLC, you can compare the effects of market volatilities on Microsoft and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fevertree Drinks.
Diversification Opportunities for Microsoft and Fevertree Drinks
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Fevertree is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fevertree Drinks PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks PLC 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks PLC has no effect on the direction of Microsoft i.e., Microsoft and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Microsoft and Fevertree Drinks
Assuming the 90 days trading horizon Microsoft is expected to generate 0.84 times more return on investment than Fevertree Drinks. However, Microsoft is 1.2 times less risky than Fevertree Drinks. It trades about 0.0 of its potential returns per unit of risk. Fevertree Drinks PLC is currently generating about -0.13 per unit of risk. If you would invest 39,812 in Microsoft on August 28, 2024 and sell it today you would lose (152.00) from holding Microsoft or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Fevertree Drinks PLC
Performance |
| Timeline |
| Microsoft |
| Fevertree Drinks PLC |
Microsoft and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fevertree Drinks
The main advantage of trading using opposite Microsoft and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| Microsoft vs. URBAN OUTFITTERS | Microsoft vs. CARSALESCOM | Microsoft vs. FAST RETAIL ADR | Microsoft vs. WisdomTree Investments |
| Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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