Correlation Between Microsoft and FTC SOLAR
Can any of the company-specific risk be diversified away by investing in both Microsoft and FTC SOLAR 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 FTC SOLAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FTC SOLAR INC, you can compare the effects of market volatilities on Microsoft and FTC SOLAR 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 FTC SOLAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FTC SOLAR.
Diversification Opportunities for Microsoft and FTC SOLAR
Excellent diversification
The 3 months correlation between Microsoft and FTC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FTC SOLAR INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTC SOLAR INC 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 FTC SOLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTC SOLAR INC has no effect on the direction of Microsoft i.e., Microsoft and FTC SOLAR go up and down completely randomly.
Pair Corralation between Microsoft and FTC SOLAR
Assuming the 90 days trading horizon Microsoft is expected to generate 15.18 times less return on investment than FTC SOLAR. But when comparing it to its historical volatility, Microsoft is 12.08 times less risky than FTC SOLAR. It trades about 0.04 of its potential returns per unit of risk. FTC SOLAR INC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 474.00 in FTC SOLAR INC on October 16, 2024 and sell it today you would lose (27.00) from holding FTC SOLAR INC or give up 5.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Microsoft vs. FTC SOLAR INC
Performance |
| Timeline |
| Microsoft |
| FTC SOLAR INC |
Microsoft and FTC SOLAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FTC SOLAR
The main advantage of trading using opposite Microsoft and FTC SOLAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FTC SOLAR 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 FTC SOLAR will offset losses from the drop in FTC SOLAR's long position.| Microsoft vs. Columbia Sportswear | Microsoft vs. Astral Foods Limited | Microsoft vs. Playtech plc | Microsoft vs. Playa Hotels Resorts |
| FTC SOLAR vs. FAIR ISAAC | FTC SOLAR vs. Corsair Gaming | FTC SOLAR vs. WIZZ AIR HLDGUNSPADR4 | FTC SOLAR vs. SYSTEMAIR AB |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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