Correlation Between Microsoft and Flutter Entertainment
Can any of the company-specific risk be diversified away by investing in both Microsoft and Flutter Entertainment 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 Flutter Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Flutter Entertainment PLC, you can compare the effects of market volatilities on Microsoft and Flutter Entertainment 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 Flutter Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Flutter Entertainment.
Diversification Opportunities for Microsoft and Flutter Entertainment
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Flutter is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of Microsoft i.e., Microsoft and Flutter Entertainment go up and down completely randomly.
Pair Corralation between Microsoft and Flutter Entertainment
Assuming the 90 days trading horizon Microsoft is expected to generate 7.75 times less return on investment than Flutter Entertainment. But when comparing it to its historical volatility, Microsoft is 1.02 times less risky than Flutter Entertainment. It trades about 0.07 of its potential returns per unit of risk. Flutter Entertainment PLC is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 20,520 in Flutter Entertainment PLC on August 29, 2024 and sell it today you would earn a total of 5,890 from holding Flutter Entertainment PLC or generate 28.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Flutter Entertainment PLC
Performance |
| Timeline |
| Microsoft |
| Flutter Entertainment PLC |
Microsoft and Flutter Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Flutter Entertainment
The main advantage of trading using opposite Microsoft and Flutter Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Flutter Entertainment 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 Flutter Entertainment will offset losses from the drop in Flutter Entertainment's long position.| Microsoft vs. Daido Steel Co | Microsoft vs. Safety Insurance Group | Microsoft vs. BLUESCOPE STEEL | Microsoft vs. Reinsurance Group of |
| Flutter Entertainment vs. Apple Inc | Flutter Entertainment vs. Apple Inc | Flutter Entertainment vs. Apple Inc | Flutter Entertainment 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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