Correlation Between Microsoft and Fidelity National
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fidelity National 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 Fidelity National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fidelity National Information, you can compare the effects of market volatilities on Microsoft and Fidelity National 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 Fidelity National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fidelity National.
Diversification Opportunities for Microsoft and Fidelity National
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Fidelity is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity National Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity National 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 Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of Microsoft i.e., Microsoft and Fidelity National go up and down completely randomly.
Pair Corralation between Microsoft and Fidelity National
Given the investment horizon of 90 days Microsoft is expected to generate 1.73 times less return on investment than Fidelity National. But when comparing it to its historical volatility, Microsoft is 1.2 times less risky than Fidelity National. It trades about 0.06 of its potential returns per unit of risk. Fidelity National Information is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,866 in Fidelity National Information on August 31, 2024 and sell it today you would earn a total of 3,121 from holding Fidelity National Information or generate 64.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.16% |
| Values | Daily Returns |
Microsoft vs. Fidelity National Information
Performance |
| Timeline |
| Microsoft |
| Fidelity National |
Microsoft and Fidelity National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fidelity National
The main advantage of trading using opposite Microsoft and Fidelity National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fidelity National 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 Fidelity National will offset losses from the drop in Fidelity National's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Fidelity National vs. Automatic Data Processing | Fidelity National vs. Superior Plus Corp | Fidelity National vs. NMI Holdings | Fidelity National vs. Origin Agritech |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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