Correlation Between Microsoft and FuelCell Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and FuelCell Energy 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 FuelCell Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FuelCell Energy, you can compare the effects of market volatilities on Microsoft and FuelCell Energy 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 FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FuelCell Energy.
Diversification Opportunities for Microsoft and FuelCell Energy
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and FuelCell is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Microsoft i.e., Microsoft and FuelCell Energy go up and down completely randomly.
Pair Corralation between Microsoft and FuelCell Energy
Given the investment horizon of 90 days Microsoft is expected to generate 200.65 times less return on investment than FuelCell Energy. But when comparing it to its historical volatility, Microsoft is 91.27 times less risky than FuelCell Energy. It trades about 0.04 of its potential returns per unit of risk. FuelCell Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,800 in FuelCell Energy on August 25, 2024 and sell it today you would lose (3,960) from holding FuelCell Energy or give up 82.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.57% |
| Values | Daily Returns |
Microsoft vs. FuelCell Energy
Performance |
| Timeline |
| Microsoft |
| FuelCell Energy |
Microsoft and FuelCell Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FuelCell Energy
The main advantage of trading using opposite Microsoft and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FuelCell Energy 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 FuelCell Energy will offset losses from the drop in FuelCell Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| FuelCell Energy vs. Samsung Electronics Co | FuelCell Energy vs. Samsung Electronics Co | FuelCell Energy vs. Hyundai Motor | FuelCell Energy vs. Toyota Motor Corp |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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