Correlation Between Microsoft and Federated Global
Can any of the company-specific risk be diversified away by investing in both Microsoft and Federated Global 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 Federated Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Federated Global Allocation, you can compare the effects of market volatilities on Microsoft and Federated Global 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 Federated Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Federated Global.
Diversification Opportunities for Microsoft and Federated Global
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Federated is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Federated Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Global All 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 Federated Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Global All has no effect on the direction of Microsoft i.e., Microsoft and Federated Global go up and down completely randomly.
Pair Corralation between Microsoft and Federated Global
Given the investment horizon of 90 days Microsoft is expected to generate 3.16 times more return on investment than Federated Global. However, Microsoft is 3.16 times more volatile than Federated Global Allocation. It trades about 0.15 of its potential returns per unit of risk. Federated Global Allocation is currently generating about 0.09 per unit of risk. If you would invest 41,830 in Microsoft on September 13, 2024 and sell it today you would earn a total of 3,637 from holding Microsoft or generate 8.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Microsoft vs. Federated Global Allocation
Performance |
| Timeline |
| Microsoft |
| Federated Global All |
Microsoft and Federated Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Federated Global
The main advantage of trading using opposite Microsoft and Federated Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Federated Global 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 Federated Global will offset losses from the drop in Federated Global's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Federated Global vs. Federated Hermes Mdt | Federated Global vs. Federated Mdt Large | Federated Global vs. Federated High Income | Federated Global vs. Federated Hermes Sdg |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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