Correlation Between Microsoft and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both Microsoft and Franklin FTSE 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 Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Franklin FTSE Europe, you can compare the effects of market volatilities on Microsoft and Franklin FTSE 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Franklin FTSE.
Diversification Opportunities for Microsoft and Franklin FTSE
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Franklin is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Franklin FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Europe 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Europe has no effect on the direction of Microsoft i.e., Microsoft and Franklin FTSE go up and down completely randomly.
Pair Corralation between Microsoft and Franklin FTSE
Given the investment horizon of 90 days Microsoft is expected to generate 1.64 times more return on investment than Franklin FTSE. However, Microsoft is 1.64 times more volatile than Franklin FTSE Europe. It trades about 0.08 of its potential returns per unit of risk. Franklin FTSE Europe is currently generating about 0.06 per unit of risk. If you would invest 24,767 in Microsoft on November 21, 2024 and sell it today you would earn a total of 16,710 from holding Microsoft or generate 67.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Franklin FTSE Europe
Performance |
| Timeline |
| Microsoft |
| Franklin FTSE Europe |
Microsoft and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Franklin FTSE
The main advantage of trading using opposite Microsoft and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Franklin FTSE vs. Franklin FTSE United | Franklin FTSE vs. SPDR Portfolio Europe | Franklin FTSE vs. Franklin FTSE Germany | Franklin FTSE vs. Franklin FTSE Japan |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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