Correlation Between Microsoft and X Fab
Can any of the company-specific risk be diversified away by investing in both Microsoft and X Fab 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 X Fab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and X Fab Silicon, you can compare the effects of market volatilities on Microsoft and X Fab 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 X Fab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and X Fab.
Diversification Opportunities for Microsoft and X Fab
Good diversification
The 3 months correlation between Microsoft and XFB is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and X Fab Silicon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Fab Silicon 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 X Fab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Fab Silicon has no effect on the direction of Microsoft i.e., Microsoft and X Fab go up and down completely randomly.
Pair Corralation between Microsoft and X Fab
Given the investment horizon of 90 days Microsoft is expected to generate 0.5 times more return on investment than X Fab. However, Microsoft is 1.99 times less risky than X Fab. It trades about 0.02 of its potential returns per unit of risk. X Fab Silicon is currently generating about -0.1 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. X Fab Silicon
Performance |
| Timeline |
| Microsoft |
| X Fab Silicon |
Microsoft and X Fab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and X Fab
The main advantage of trading using opposite Microsoft and X Fab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, X Fab 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 X Fab will offset losses from the drop in X Fab's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| X Fab vs. Singapore Airlines Limited | X Fab vs. FANDIFI TECHNOLOGY P | X Fab vs. Microchip Technology Incorporated | X Fab vs. AECOM TECHNOLOGY |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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