Correlation Between Microsoft and FD Technologies
Can any of the company-specific risk be diversified away by investing in both Microsoft and FD Technologies 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 FD Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FD Technologies PLC, you can compare the effects of market volatilities on Microsoft and FD Technologies 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 FD Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FD Technologies.
Diversification Opportunities for Microsoft and FD Technologies
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and GYQ is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FD Technologies PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FD Technologies 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 FD Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FD Technologies PLC has no effect on the direction of Microsoft i.e., Microsoft and FD Technologies go up and down completely randomly.
Pair Corralation between Microsoft and FD Technologies
Given the investment horizon of 90 days Microsoft is expected to generate 0.56 times more return on investment than FD Technologies. However, Microsoft is 1.78 times less risky than FD Technologies. It trades about 0.06 of its potential returns per unit of risk. FD Technologies PLC is currently generating about 0.02 per unit of risk. If you would invest 32,302 in Microsoft on September 1, 2024 and sell it today you would earn a total of 10,044 from holding Microsoft or generate 31.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.15% |
| Values | Daily Returns |
Microsoft vs. FD Technologies PLC
Performance |
| Timeline |
| Microsoft |
| FD Technologies PLC |
Microsoft and FD Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FD Technologies
The main advantage of trading using opposite Microsoft and FD Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FD Technologies 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 FD Technologies will offset losses from the drop in FD Technologies' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| FD Technologies vs. Dalata Hotel Group | FD Technologies vs. Uniphar Group PLC | FD Technologies vs. KLP Aksje Fremvoksende | FD Technologies vs. Origin Enterprises Plc |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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