Correlation Between Microsoft and FSP Technology
Can any of the company-specific risk be diversified away by investing in both Microsoft and FSP Technology 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 FSP Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FSP Technology, you can compare the effects of market volatilities on Microsoft and FSP Technology 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 FSP Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FSP Technology.
Diversification Opportunities for Microsoft and FSP Technology
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and FSP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FSP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSP Technology 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 FSP Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSP Technology has no effect on the direction of Microsoft i.e., Microsoft and FSP Technology go up and down completely randomly.
Pair Corralation between Microsoft and FSP Technology
Given the investment horizon of 90 days Microsoft is expected to under-perform the FSP Technology. In addition to that, Microsoft is 1.09 times more volatile than FSP Technology. It trades about -0.06 of its total potential returns per unit of risk. FSP Technology is currently generating about 0.26 per unit of volatility. If you would invest 6,070 in FSP Technology on November 5, 2024 and sell it today you would earn a total of 430.00 from holding FSP Technology or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 73.68% |
| Values | Daily Returns |
Microsoft vs. FSP Technology
Performance |
| Timeline |
| Microsoft |
| FSP Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Microsoft and FSP Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FSP Technology
The main advantage of trading using opposite Microsoft and FSP Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FSP Technology 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 FSP Technology will offset losses from the drop in FSP Technology's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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