Correlation Between Microsoft and Fiverr International
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fiverr International 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 Fiverr International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fiverr International, you can compare the effects of market volatilities on Microsoft and Fiverr International 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 Fiverr International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fiverr International.
Diversification Opportunities for Microsoft and Fiverr International
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Fiverr is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fiverr International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiverr International 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 Fiverr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiverr International has no effect on the direction of Microsoft i.e., Microsoft and Fiverr International go up and down completely randomly.
Pair Corralation between Microsoft and Fiverr International
Given the investment horizon of 90 days Microsoft is expected to under-perform the Fiverr International. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.55 times less risky than Fiverr International. The stock trades about -0.05 of its potential returns per unit of risk. The Fiverr International is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,460 in Fiverr International on August 27, 2024 and sell it today you would earn a total of 751.00 from holding Fiverr International or generate 30.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Fiverr International
Performance |
| Timeline |
| Microsoft |
| Fiverr International |
Microsoft and Fiverr International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fiverr International
The main advantage of trading using opposite Microsoft and Fiverr International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fiverr International 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 Fiverr International will offset losses from the drop in Fiverr International's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Fiverr International vs. Snap Inc | Fiverr International vs. Twilio Inc | Fiverr International vs. Spotify Technology SA | Fiverr International vs. Baidu 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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