Correlation Between Microsoft and First International
Can any of the company-specific risk be diversified away by investing in both Microsoft and First International 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 International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and First International Bank, you can compare the effects of market volatilities on Microsoft and First International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and First International.
Diversification Opportunities for Microsoft and First International
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and First is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and First International Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First International Bank 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First International Bank has no effect on the direction of Microsoft i.e., Microsoft and First International go up and down completely randomly.
Pair Corralation between Microsoft and First International
Given the investment horizon of 90 days Microsoft is expected to generate 0.67 times more return on investment than First International. However, Microsoft is 1.5 times less risky than First International. It trades about 0.09 of its potential returns per unit of risk. First International Bank is currently generating about 0.01 per unit of risk. If you would invest 31,198 in Microsoft on January 19, 2024 and sell it today you would earn a total of 9,229 from holding Microsoft or generate 29.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 81.5% |
| Values | Daily Returns |
Microsoft vs. First International Bank
Performance |
| Timeline |
| Microsoft |
| First International Bank |
Microsoft and First International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and First International
The main advantage of trading using opposite Microsoft and First International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, First International 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 International will offset losses from the drop in First International's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| First International vs. Rani Zim Shopping | First International vs. Accel Solutions Group | First International vs. Rapac Communication Infrastructure |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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