Correlation Between Microsoft and Fidelity International
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fidelity International 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 Fidelity International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fidelity International Discovery, you can compare the effects of market volatilities on Microsoft and Fidelity International 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 Fidelity International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fidelity International.
Diversification Opportunities for Microsoft and Fidelity International
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Fidelity is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity International Discove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International 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 Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Microsoft i.e., Microsoft and Fidelity International go up and down completely randomly.
Pair Corralation between Microsoft and Fidelity International
Given the investment horizon of 90 days Microsoft is expected to under-perform the Fidelity International. In addition to that, Microsoft is 2.35 times more volatile than Fidelity International Discovery. It trades about -0.06 of its total potential returns per unit of risk. Fidelity International Discovery is currently generating about 0.17 per unit of volatility. If you would invest 4,835 in Fidelity International Discovery on November 5, 2024 and sell it today you would earn a total of 138.00 from holding Fidelity International Discovery or generate 2.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Microsoft vs. Fidelity International Discove
Performance |
| Timeline |
| Microsoft |
| Fidelity International |
Microsoft and Fidelity International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fidelity International
The main advantage of trading using opposite Microsoft and Fidelity International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fidelity International 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 Fidelity International will offset losses from the drop in Fidelity International'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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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