Correlation Between Microsoft and First American
Can any of the company-specific risk be diversified away by investing in both Microsoft and First American 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 First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and First American Funds, you can compare the effects of market volatilities on Microsoft and First American 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 First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and First American.
Diversification Opportunities for Microsoft and First American
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and First is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Microsoft i.e., Microsoft and First American go up and down completely randomly.
Pair Corralation between Microsoft and First American
Given the investment horizon of 90 days Microsoft is expected to under-perform the First American. In addition to that, Microsoft is 8.25 times more volatile than First American Funds. It trades about -0.01 of its total potential returns per unit of risk. First American Funds is currently generating about 0.16 per unit of volatility. If you would invest 97.00 in First American Funds on August 25, 2024 and sell it today you would earn a total of 3.00 from holding First American Funds or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. First American Funds
Performance |
| Timeline |
| Microsoft |
| First American Funds |
Microsoft and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and First American
The main advantage of trading using opposite Microsoft and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |