Correlation Between Microsoft and Fresenius Medical
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fresenius Medical 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 Fresenius Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fresenius Medical Care, you can compare the effects of market volatilities on Microsoft and Fresenius Medical 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 Fresenius Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fresenius Medical.
Diversification Opportunities for Microsoft and Fresenius Medical
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Fresenius is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Microsoft i.e., Microsoft and Fresenius Medical go up and down completely randomly.
Pair Corralation between Microsoft and Fresenius Medical
Assuming the 90 days trading horizon Microsoft is expected to under-perform the Fresenius Medical. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.39 times less risky than Fresenius Medical. The stock trades about -0.12 of its potential returns per unit of risk. The Fresenius Medical Care is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 10,945 in Fresenius Medical Care on October 25, 2024 and sell it today you would earn a total of 2,744 from holding Fresenius Medical Care or generate 25.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Fresenius Medical Care
Performance |
| Timeline |
| Microsoft |
| Fresenius Medical Care |
Microsoft and Fresenius Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fresenius Medical
The main advantage of trading using opposite Microsoft and Fresenius Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fresenius Medical 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 Fresenius Medical will offset losses from the drop in Fresenius Medical's long position.| Microsoft vs. Arrow Electronics, | Microsoft vs. Telecomunicaes Brasileiras SA | Microsoft vs. Globus Medical, | Microsoft vs. Fresenius Medical Care |
| Fresenius Medical vs. JB Hunt Transport | Fresenius Medical vs. Tyson Foods | Fresenius Medical vs. Telecomunicaes Brasileiras SA | Fresenius Medical vs. Chunghwa Telecom Co, |
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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