Correlation Between Microsoft and Freedom 100
Can any of the company-specific risk be diversified away by investing in both Microsoft and Freedom 100 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 Freedom 100 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Freedom 100 Emerging, you can compare the effects of market volatilities on Microsoft and Freedom 100 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 Freedom 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Freedom 100.
Diversification Opportunities for Microsoft and Freedom 100
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Freedom is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Freedom 100 Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom 100 Emerging 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 Freedom 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom 100 Emerging has no effect on the direction of Microsoft i.e., Microsoft and Freedom 100 go up and down completely randomly.
Pair Corralation between Microsoft and Freedom 100
Given the investment horizon of 90 days Microsoft is expected to generate 1.3 times more return on investment than Freedom 100. However, Microsoft is 1.3 times more volatile than Freedom 100 Emerging. It trades about 0.09 of its potential returns per unit of risk. Freedom 100 Emerging is currently generating about 0.05 per unit of risk. If you would invest 24,146 in Microsoft on August 30, 2024 and sell it today you would earn a total of 18,153 from holding Microsoft or generate 75.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Freedom 100 Emerging
Performance |
| Timeline |
| Microsoft |
| Freedom 100 Emerging |
Microsoft and Freedom 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Freedom 100
The main advantage of trading using opposite Microsoft and Freedom 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Freedom 100 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 Freedom 100 will offset losses from the drop in Freedom 100's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Freedom 100 vs. Horizon Kinetics Inflation | Freedom 100 vs. iShares MSCI Emerging | Freedom 100 vs. iShares Emerging Markets | Freedom 100 vs. WisdomTree International High |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |