Correlation Between Microsoft and FS Credit
Can any of the company-specific risk be diversified away by investing in both Microsoft and FS Credit 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 FS Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FS Credit Opportunities, you can compare the effects of market volatilities on Microsoft and FS Credit 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 FS Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FS Credit.
Diversification Opportunities for Microsoft and FS Credit
Significant diversification
The 3 months correlation between Microsoft and FSCO is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FS Credit Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Credit Opportunities 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 FS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Credit Opportunities has no effect on the direction of Microsoft i.e., Microsoft and FS Credit go up and down completely randomly.
Pair Corralation between Microsoft and FS Credit
Given the investment horizon of 90 days Microsoft is expected to generate 1.06 times less return on investment than FS Credit. In addition to that, Microsoft is 1.16 times more volatile than FS Credit Opportunities. It trades about 0.08 of its total potential returns per unit of risk. FS Credit Opportunities is currently generating about 0.1 per unit of volatility. If you would invest 380.00 in FS Credit Opportunities on September 2, 2024 and sell it today you would earn a total of 300.00 from holding FS Credit Opportunities or generate 78.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. FS Credit Opportunities
Performance |
| Timeline |
| Microsoft |
| FS Credit Opportunities |
Microsoft and FS Credit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FS Credit
The main advantage of trading using opposite Microsoft and FS Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FS Credit 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 FS Credit will offset losses from the drop in FS Credit's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| FS Credit vs. MFS Investment Grade | FS Credit vs. Invesco High Income | FS Credit vs. Eaton Vance National | FS Credit vs. Federated Premier Municipal |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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