Correlation Between Microsoft and Fantom
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fantom 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 Fantom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fantom, you can compare the effects of market volatilities on Microsoft and Fantom 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 Fantom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fantom.
Diversification Opportunities for Microsoft and Fantom
Weak diversification
The 3 months correlation between Microsoft and Fantom is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fantom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fantom 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 Fantom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fantom has no effect on the direction of Microsoft i.e., Microsoft and Fantom go up and down completely randomly.
Pair Corralation between Microsoft and Fantom
Given the investment horizon of 90 days Microsoft is expected to generate 8.64 times less return on investment than Fantom. But when comparing it to its historical volatility, Microsoft is 10.31 times less risky than Fantom. It trades about 0.08 of its potential returns per unit of risk. Fantom is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 23.00 in Fantom on August 27, 2024 and sell it today you would earn a total of 65.00 from holding Fantom or generate 282.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 60.28% |
| Values | Daily Returns |
Microsoft vs. Fantom
Performance |
| Timeline |
| Microsoft |
| Fantom |
Microsoft and Fantom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fantom
The main advantage of trading using opposite Microsoft and Fantom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fantom 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 Fantom will offset losses from the drop in Fantom's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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