Correlation Between Microsoft and Fidelity Municipal
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fidelity Municipal 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 Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fidelity Municipal Income, you can compare the effects of market volatilities on Microsoft and Fidelity Municipal 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 Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fidelity Municipal.
Diversification Opportunities for Microsoft and Fidelity Municipal
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Fidelity is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Municipal Income 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 Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Municipal Income has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Municipal go up and down completely randomly.
Pair Corralation between Microsoft and Fidelity Municipal
Given the investment horizon of 90 days Microsoft is expected to generate 25.84 times more return on investment than Fidelity Municipal. However, Microsoft is 25.84 times more volatile than Fidelity Municipal Income. It trades about 0.15 of its potential returns per unit of risk. Fidelity Municipal Income is currently generating about 0.22 per unit of risk. If you would invest 40,955 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,391 from holding Microsoft or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Fidelity Municipal Income
Performance |
| Timeline |
| Microsoft |
| Fidelity Municipal Income |
Microsoft and Fidelity Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fidelity Municipal
The main advantage of trading using opposite Microsoft and Fidelity Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fidelity Municipal 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 Municipal will offset losses from the drop in Fidelity Municipal's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Fidelity Municipal vs. Fidelity Global Bond | Fidelity Municipal vs. Fidelity Short Duration | Fidelity Municipal vs. Fidelity California Limited |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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