Correlation Between Microsoft and FF Global
Can any of the company-specific risk be diversified away by investing in both Microsoft and FF Global 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 FF Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FF Global, you can compare the effects of market volatilities on Microsoft and FF Global 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 FF Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FF Global.
Diversification Opportunities for Microsoft and FF Global
Average diversification
The 3 months correlation between Microsoft and FJ2P is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FF Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FF Global 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 FF Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FF Global has no effect on the direction of Microsoft i.e., Microsoft and FF Global go up and down completely randomly.
Pair Corralation between Microsoft and FF Global
Given the investment horizon of 90 days Microsoft is expected to generate 1.32 times more return on investment than FF Global. However, Microsoft is 1.32 times more volatile than FF Global. It trades about 0.32 of its potential returns per unit of risk. FF Global is currently generating about 0.21 per unit of risk. If you would invest 42,218 in Microsoft on September 13, 2024 and sell it today you would earn a total of 3,249 from holding Microsoft or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. FF Global
Performance |
| Timeline |
| Microsoft |
| FF Global |
Microsoft and FF Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FF Global
The main advantage of trading using opposite Microsoft and FF Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FF Global 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 FF Global will offset losses from the drop in FF Global's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| FF Global vs. Azvalor Global Value | FF Global vs. JPM Global Natural | FF Global vs. Cobas Global PP | FF Global vs. Aberdeen Global Asian |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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