Correlation Between Fiserv and Microsoft

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Can any of the company-specific risk be diversified away by investing in both Fiserv and Microsoft 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 Fiserv and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fiserv Inc and Microsoft, you can compare the effects of market volatilities on Fiserv and Microsoft 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 Fiserv with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fiserv and Microsoft.

Diversification Opportunities for Fiserv and Microsoft

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fiserv and Microsoft is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fiserv Inc and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Fiserv 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 Fiserv Inc are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Fiserv i.e., Fiserv and Microsoft go up and down completely randomly.

Pair Corralation between Fiserv and Microsoft

Given the investment horizon of 90 days Fiserv Inc is expected to generate 0.85 times more return on investment than Microsoft. However, Fiserv Inc is 1.17 times less risky than Microsoft. It trades about 0.01 of its potential returns per unit of risk. Microsoft is currently generating about -0.03 per unit of risk. If you would invest  10,836  in Fiserv Inc on October 30, 2022 and sell it today you would lose (187.00)  from holding Fiserv Inc or give up 1.73% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Fiserv Inc  vs.  Microsoft

 Performance (%) 
       Timeline  
Fiserv Inc 
Fiserv Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fiserv Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fiserv is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fiserv Price Channel

Microsoft 
Microsoft Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2023.

Microsoft Price Channel

Fiserv and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fiserv and Microsoft

The main advantage of trading using opposite Fiserv and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiserv position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
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The idea behind Fiserv Inc and Microsoft pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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