Correlation Between Microsoft and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Microsoft and Far Eastern 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 Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Far Eastern New, you can compare the effects of market volatilities on Microsoft and Far Eastern 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 Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Far Eastern.
Diversification Opportunities for Microsoft and Far Eastern
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Far is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Far Eastern New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern New 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 Far Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far Eastern New has no effect on the direction of Microsoft i.e., Microsoft and Far Eastern go up and down completely randomly.
Pair Corralation between Microsoft and Far Eastern
Given the investment horizon of 90 days Microsoft is expected to generate 0.87 times more return on investment than Far Eastern. However, Microsoft is 1.16 times less risky than Far Eastern. It trades about 0.03 of its potential returns per unit of risk. Far Eastern New is currently generating about -0.03 per unit of risk. If you would invest 41,631 in Microsoft on August 30, 2024 and sell it today you would earn a total of 668.00 from holding Microsoft or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Microsoft vs. Far Eastern New
Performance |
| Timeline |
| Microsoft |
| Far Eastern New |
Microsoft and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Far Eastern
The main advantage of trading using opposite Microsoft and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Far Eastern 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 Far Eastern will offset losses from the drop in Far Eastern's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Far Eastern vs. Yulon Motor Co | Far Eastern vs. Far Eastern Department | Far Eastern vs. China Steel Corp | Far Eastern vs. Chang Hwa Commercial |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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