Correlation Between Microsoft and First Interstate
Can any of the company-specific risk be diversified away by investing in both Microsoft and First Interstate 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 Interstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and First Interstate BancSystem, you can compare the effects of market volatilities on Microsoft and First Interstate 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 Interstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and First Interstate.
Diversification Opportunities for Microsoft and First Interstate
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and First is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban 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 Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of Microsoft i.e., Microsoft and First Interstate go up and down completely randomly.
Pair Corralation between Microsoft and First Interstate
Given the investment horizon of 90 days Microsoft is expected to generate 1.72 times less return on investment than First Interstate. But when comparing it to its historical volatility, Microsoft is 1.77 times less risky than First Interstate. It trades about 0.06 of its potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,272 in First Interstate BancSystem on August 31, 2024 and sell it today you would earn a total of 1,225 from holding First Interstate BancSystem or generate 53.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. First Interstate BancSystem
Performance |
| Timeline |
| Microsoft |
| First Interstate Ban |
Microsoft and First Interstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and First Interstate
The main advantage of trading using opposite Microsoft and First Interstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, First Interstate 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 Interstate will offset losses from the drop in First Interstate's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |