Correlation Between Microsoft and FGV Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and FGV Holdings 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 FGV Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FGV Holdings Bhd, you can compare the effects of market volatilities on Microsoft and FGV Holdings 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 FGV Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FGV Holdings.
Diversification Opportunities for Microsoft and FGV Holdings
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and FGV is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FGV Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGV Holdings Bhd 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 FGV Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGV Holdings Bhd has no effect on the direction of Microsoft i.e., Microsoft and FGV Holdings go up and down completely randomly.
Pair Corralation between Microsoft and FGV Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 0.72 times more return on investment than FGV Holdings. However, Microsoft is 1.38 times less risky than FGV Holdings. It trades about 0.07 of its potential returns per unit of risk. FGV Holdings Bhd is currently generating about -0.02 per unit of risk. If you would invest 36,988 in Microsoft on September 12, 2024 and sell it today you would earn a total of 7,345 from holding Microsoft or generate 19.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Microsoft vs. FGV Holdings Bhd
Performance |
| Timeline |
| Microsoft |
| FGV Holdings Bhd |
Microsoft and FGV Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FGV Holdings
The main advantage of trading using opposite Microsoft and FGV Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FGV Holdings 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 FGV Holdings will offset losses from the drop in FGV Holdings' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| FGV Holdings vs. Nestle Bhd | FGV Holdings vs. British American Tobacco | FGV Holdings vs. FARM FRESH BERHAD | FGV Holdings vs. Kawan Food Bhd |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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