Correlation Between Microsoft and First Internet
Can any of the company-specific risk be diversified away by investing in both Microsoft and First Internet 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 First Internet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and First Internet Bancorp, you can compare the effects of market volatilities on Microsoft and First Internet 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 First Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and First Internet.
Diversification Opportunities for Microsoft and First Internet
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and First is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and First Internet Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Internet Bancorp 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 First Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Internet Bancorp has no effect on the direction of Microsoft i.e., Microsoft and First Internet go up and down completely randomly.
Pair Corralation between Microsoft and First Internet
Given the investment horizon of 90 days Microsoft is expected to generate 1.28 times less return on investment than First Internet. But when comparing it to its historical volatility, Microsoft is 2.32 times less risky than First Internet. It trades about 0.08 of its potential returns per unit of risk. First Internet Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,570 in First Internet Bancorp on August 27, 2024 and sell it today you would earn a total of 1,622 from holding First Internet Bancorp or generate 63.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. First Internet Bancorp
Performance |
| Timeline |
| Microsoft |
| First Internet Bancorp |
Microsoft and First Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and First Internet
The main advantage of trading using opposite Microsoft and First Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, First Internet 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 First Internet will offset losses from the drop in First Internet's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| First Internet vs. First Capital | First Internet vs. Finward Bancorp | First Internet vs. Community West Bancshares | First Internet vs. QCR Holdings |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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