Correlation Between Flow Traders and Microsoft

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

By analyzing existing cross correlation between Flow Traders NV and Microsoft, you can compare the effects of market volatilities on Flow Traders 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 Flow Traders with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Traders and Microsoft.

Diversification Opportunities for Flow Traders and Microsoft

0.31

Correlation Coefficient

Flow Traders  Microsoft

Weak diversification

The 3 months correlation between Flow and Microsoft is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Flow Traders NV and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Flow Traders 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 Flow Traders NV 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 Flow Traders i.e., Flow Traders and Microsoft go up and down completely randomly.

Pair Corralation between Flow Traders and Microsoft

Assuming the 90 days trading horizon Flow Traders NV is expected to generate 1.15 times more return on investment than Microsoft. However, Flow Traders is 1.15 times more volatile than Microsoft. It trades about 0.32 of its potential returns per unit of risk. Microsoft is currently generating about -0.23 per unit of risk. If you would invest  2,108  in Flow Traders NV on October 12, 2024 and sell it today you would earn a total of  250.00  from holding Flow Traders NV or generate 11.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Flow Traders NV  vs.  Microsoft

Flow Traders NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Traders NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flow Traders may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Microsoft is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Flow Traders and Microsoft

The main advantage of trading using opposite Flow Traders and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flow Traders 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.

The idea behind Flow Traders NV 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.