Correlation Between Microsoft and Fidelity Trend
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fidelity Trend 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 Trend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fidelity Trend Fund, you can compare the effects of market volatilities on Microsoft and Fidelity Trend 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 Trend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fidelity Trend.
Diversification Opportunities for Microsoft and Fidelity Trend
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Fidelity is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity Trend Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Trend 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 Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Trend has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Trend go up and down completely randomly.
Pair Corralation between Microsoft and Fidelity Trend
Given the investment horizon of 90 days Microsoft is expected to generate 1.02 times less return on investment than Fidelity Trend. In addition to that, Microsoft is 1.11 times more volatile than Fidelity Trend Fund. It trades about 0.09 of its total potential returns per unit of risk. Fidelity Trend Fund is currently generating about 0.1 per unit of volatility. If you would invest 11,766 in Fidelity Trend Fund on August 30, 2024 and sell it today you would earn a total of 9,331 from holding Fidelity Trend Fund or generate 79.3% 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. Fidelity Trend Fund
Performance |
| Timeline |
| Microsoft |
| Fidelity Trend |
Microsoft and Fidelity Trend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fidelity Trend
The main advantage of trading using opposite Microsoft and Fidelity Trend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fidelity Trend 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 Trend will offset losses from the drop in Fidelity Trend's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Fidelity Trend vs. Fidelity Stock Selector | Fidelity Trend vs. Fidelity Focused Stock | Fidelity Trend vs. Fidelity Disciplined Equity | Fidelity Trend vs. Fidelity Stock Selector |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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