Correlation Between Microsoft and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fevertree Drinks 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 Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fevertree Drinks Plc, you can compare the effects of market volatilities on Microsoft and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fevertree Drinks.
Diversification Opportunities for Microsoft and Fevertree Drinks
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Fevertree is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Microsoft i.e., Microsoft and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Microsoft and Fevertree Drinks
Given the investment horizon of 90 days Microsoft is expected to generate 0.56 times more return on investment than Fevertree Drinks. However, Microsoft is 1.8 times less risky than Fevertree Drinks. It trades about 0.02 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.12 per unit of risk. If you would invest 42,240 in Microsoft on September 3, 2024 and sell it today you would earn a total of 858.00 from holding Microsoft or generate 2.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.9% |
| Values | Daily Returns |
Microsoft vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Microsoft |
| Fevertree Drinks Plc |
Microsoft and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fevertree Drinks
The main advantage of trading using opposite Microsoft and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Fevertree Drinks vs. Playtech plc | Fevertree Drinks vs. ANTA SPORTS PRODUCT | Fevertree Drinks vs. Columbia Sportswear | Fevertree Drinks vs. PLAY2CHILL SA ZY |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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