Correlation Between Microsoft and First Community
Can any of the company-specific risk be diversified away by investing in both Microsoft and First Community 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 First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and First Community Financial, you can compare the effects of market volatilities on Microsoft and First Community 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 First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and First Community.
Diversification Opportunities for Microsoft and First Community
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Financial has no effect on the direction of Microsoft i.e., Microsoft and First Community go up and down completely randomly.
Pair Corralation between Microsoft and First Community
Given the investment horizon of 90 days Microsoft is expected to generate 0.62 times more return on investment than First Community. However, Microsoft is 1.61 times less risky than First Community. It trades about -0.01 of its potential returns per unit of risk. First Community Financial is currently generating about -0.15 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would lose (275.00) from holding Microsoft or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. First Community Financial
Performance |
| Timeline |
| Microsoft |
| First Community Financial |
Microsoft and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and First Community
The main advantage of trading using opposite Microsoft and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, First Community 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 First Community will offset losses from the drop in First Community's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| First Community vs. CCSB Financial Corp | First Community vs. Bank of Utica | First Community vs. BEO Bancorp | First Community vs. First Community |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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