Correlation Between Microsoft and Fidelity Advisor

Can any of the company-specific risk be diversified away by investing in both Microsoft and Fidelity Advisor 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 Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Fidelity Advisor Communication, you can compare the effects of market volatilities on Microsoft and Fidelity Advisor 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 Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fidelity Advisor.

Diversification Opportunities for Microsoft and Fidelity Advisor

0.85

Correlation Coefficient

Microsoft  Fidelity Advisor

Very poor diversification

The 3 months correlation between Microsoft and Fidelity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity Advisor Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Com 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 Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Com has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Microsoft and Fidelity Advisor

Given the investment horizon of 90 days Microsoft is expected to generate 1.13 times more return on investment than Fidelity Advisor. However, Microsoft is 1.13 times more volatile than Fidelity Advisor Communication. It trades about 0.05 of its potential returns per unit of risk. Fidelity Advisor Communication is currently generating about 0.04 per unit of risk. If you would invest  28,483  in Microsoft on January 24, 2024 and sell it today you would earn a total of  11,613  from holding Microsoft or generate 40.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Microsoft  vs.  Fidelity Advisor Communication

Microsoft

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Fidelity Advisor Com

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor Communication are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Fidelity Advisor

The main advantage of trading using opposite Microsoft and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fidelity Advisor 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 Advisor will offset losses from the drop in Fidelity Advisor's long position.

The idea behind Microsoft and Fidelity Advisor Communication 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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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.