Correlation Between Microsoft and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Forum 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 Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Forum Energy Metals, you can compare the effects of market volatilities on Microsoft and Forum 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 Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Forum Energy.
Diversification Opportunities for Microsoft and Forum Energy
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Forum is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals 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 Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Microsoft i.e., Microsoft and Forum Energy go up and down completely randomly.
Pair Corralation between Microsoft and Forum Energy
Given the investment horizon of 90 days Microsoft is expected to generate 0.16 times more return on investment than Forum Energy. However, Microsoft is 6.42 times less risky than Forum Energy. It trades about -0.04 of its potential returns per unit of risk. Forum Energy Metals is currently generating about -0.07 per unit of risk. If you would invest 42,388 in Microsoft on August 25, 2024 and sell it today you would lose (688.00) from holding Microsoft or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Forum Energy Metals
Performance |
| Timeline |
| Microsoft |
| Forum Energy Metals |
Microsoft and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Forum Energy
The main advantage of trading using opposite Microsoft and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Forum 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 Forum Energy will offset losses from the drop in Forum Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Forum Energy vs. Namibia Critical Metals | Forum Energy vs. Themac Resources Group | Forum Energy vs. Pasinex Resources Limited | Forum Energy vs. NGEx Minerals |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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