Correlation Between Microsoft and FNB Corp
Can any of the company-specific risk be diversified away by investing in both Microsoft and FNB Corp 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 FNB Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FNB Corp, you can compare the effects of market volatilities on Microsoft and FNB Corp 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 FNB Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FNB Corp.
Diversification Opportunities for Microsoft and FNB Corp
Good diversification
The 3 months correlation between Microsoft and FNB is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FNB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Corp 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 FNB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Corp has no effect on the direction of Microsoft i.e., Microsoft and FNB Corp go up and down completely randomly.
Pair Corralation between Microsoft and FNB Corp
Given the investment horizon of 90 days Microsoft is expected to generate 1.49 times less return on investment than FNB Corp. But when comparing it to its historical volatility, Microsoft is 1.4 times less risky than FNB Corp. It trades about 0.06 of its potential returns per unit of risk. FNB Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,153 in FNB Corp on August 31, 2024 and sell it today you would earn a total of 562.00 from holding FNB Corp or generate 48.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. FNB Corp
Performance |
| Timeline |
| Microsoft |
| FNB Corp |
Microsoft and FNB Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FNB Corp
The main advantage of trading using opposite Microsoft and FNB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FNB Corp 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 FNB Corp will offset losses from the drop in FNB Corp's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| FNB Corp vs. ST Bancorp | FNB Corp vs. CrossFirst Bankshares | FNB Corp vs. Enterprise Financial Services | FNB Corp vs. The First Bancshares, |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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