Correlation Between Microsoft and Freedom Bank
Can any of the company-specific risk be diversified away by investing in both Microsoft and Freedom Bank 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 Freedom Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Freedom Bank of, you can compare the effects of market volatilities on Microsoft and Freedom Bank 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 Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Freedom Bank.
Diversification Opportunities for Microsoft and Freedom Bank
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Freedom is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Microsoft i.e., Microsoft and Freedom Bank go up and down completely randomly.
Pair Corralation between Microsoft and Freedom Bank
Given the investment horizon of 90 days Microsoft is expected to under-perform the Freedom Bank. In addition to that, Microsoft is 2.82 times more volatile than Freedom Bank of. It trades about -0.03 of its total potential returns per unit of risk. Freedom Bank of is currently generating about -0.03 per unit of volatility. If you would invest 1,060 in Freedom Bank of on August 24, 2024 and sell it today you would lose (4.00) from holding Freedom Bank of or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Freedom Bank of
Performance |
| Timeline |
| Microsoft |
| Freedom Bank |
Microsoft and Freedom Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Freedom Bank
The main advantage of trading using opposite Microsoft and Freedom Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Freedom Bank 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 Freedom Bank will offset losses from the drop in Freedom Bank's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Freedom Bank vs. Invesco High Income | Freedom Bank vs. Blackrock Muniholdings Ny | Freedom Bank vs. MFS Investment Grade | Freedom Bank vs. Federated Premier Municipal |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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