Correlation Between Microsoft and Freelancer
Can any of the company-specific risk be diversified away by investing in both Microsoft and Freelancer 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 Freelancer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Freelancer, you can compare the effects of market volatilities on Microsoft and Freelancer 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 Freelancer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Freelancer.
Diversification Opportunities for Microsoft and Freelancer
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Freelancer is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Freelancer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freelancer 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 Freelancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freelancer has no effect on the direction of Microsoft i.e., Microsoft and Freelancer go up and down completely randomly.
Pair Corralation between Microsoft and Freelancer
Given the investment horizon of 90 days Microsoft is expected to generate 0.35 times more return on investment than Freelancer. However, Microsoft is 2.87 times less risky than Freelancer. It trades about 0.05 of its potential returns per unit of risk. Freelancer is currently generating about -0.05 per unit of risk. If you would invest 40,862 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,484 from holding Microsoft or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.97% |
| Values | Daily Returns |
Microsoft vs. Freelancer
Performance |
| Timeline |
| Microsoft |
| Freelancer |
Microsoft and Freelancer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Freelancer
The main advantage of trading using opposite Microsoft and Freelancer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Freelancer 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 Freelancer will offset losses from the drop in Freelancer's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Freelancer vs. Oneview Healthcare PLC | Freelancer vs. Event Hospitality and | Freelancer vs. Austco Healthcare | Freelancer vs. EVE Health Group |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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