Correlation Between Microsoft and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fidelity Advisor 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 Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fidelity Advisor Strategic, you can compare the effects of market volatilities on Microsoft and Fidelity Advisor 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 Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fidelity Advisor.
Diversification Opportunities for Microsoft and Fidelity Advisor
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Fidelity is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity Advisor Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Str 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 Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Str has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Microsoft and Fidelity Advisor
Given the investment horizon of 90 days Microsoft is expected to generate 5.43 times more return on investment than Fidelity Advisor. However, Microsoft is 5.43 times more volatile than Fidelity Advisor Strategic. It trades about 0.19 of its potential returns per unit of risk. Fidelity Advisor Strategic is currently generating about 0.29 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Fidelity Advisor Strategic
Performance |
| Timeline |
| Microsoft |
| Fidelity Advisor Str |
Microsoft and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fidelity Advisor
The main advantage of trading using opposite Microsoft and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fidelity Advisor 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 Fidelity Advisor will offset losses from the drop in Fidelity Advisor'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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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