Correlation Between Microsoft and Finward Bancorp
Can any of the company-specific risk be diversified away by investing in both Microsoft and Finward Bancorp 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 Finward Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Finward Bancorp, you can compare the effects of market volatilities on Microsoft and Finward Bancorp 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 Finward Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Finward Bancorp.
Diversification Opportunities for Microsoft and Finward Bancorp
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Finward is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp 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 Finward Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finward Bancorp has no effect on the direction of Microsoft i.e., Microsoft and Finward Bancorp go up and down completely randomly.
Pair Corralation between Microsoft and Finward Bancorp
Given the investment horizon of 90 days Microsoft is expected to under-perform the Finward Bancorp. In addition to that, Microsoft is 1.69 times more volatile than Finward Bancorp. It trades about -0.04 of its total potential returns per unit of risk. Finward Bancorp is currently generating about -0.04 per unit of volatility. If you would invest 3,123 in Finward Bancorp on August 30, 2024 and sell it today you would lose (32.00) from holding Finward Bancorp or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Finward Bancorp
Performance |
| Timeline |
| Microsoft |
| Finward Bancorp |
Microsoft and Finward Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Finward Bancorp
The main advantage of trading using opposite Microsoft and Finward Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Finward Bancorp 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 Finward Bancorp will offset losses from the drop in Finward Bancorp's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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