Correlation Between Microsoft and Fluence Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fluence Energy 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 Fluence Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fluence Energy, you can compare the effects of market volatilities on Microsoft and Fluence Energy 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 Fluence Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fluence Energy.
Diversification Opportunities for Microsoft and Fluence Energy
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Fluence is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fluence Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fluence Energy 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 Fluence Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fluence Energy has no effect on the direction of Microsoft i.e., Microsoft and Fluence Energy go up and down completely randomly.
Pair Corralation between Microsoft and Fluence Energy
Given the investment horizon of 90 days Microsoft is expected to under-perform the Fluence Energy. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.95 times less risky than Fluence Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Fluence Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,081 in Fluence Energy on August 27, 2024 and sell it today you would earn a total of 269.00 from holding Fluence Energy or generate 12.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Fluence Energy
Performance |
| Timeline |
| Microsoft |
| Fluence Energy |
Microsoft and Fluence Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fluence Energy
The main advantage of trading using opposite Microsoft and Fluence Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fluence Energy 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 Fluence Energy will offset losses from the drop in Fluence Energy's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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