Correlation Between Microsoft and FARM 51

Can any of the company-specific risk be diversified away by investing in both Microsoft and FARM 51 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 FARM 51 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and FARM 51 GROUP, you can compare the effects of market volatilities on Microsoft and FARM 51 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 FARM 51. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FARM 51.

Diversification Opportunities for Microsoft and FARM 51

-0.47

Correlation Coefficient

Microsoft  FARM 51

Very good diversification

The 3 months correlation between Microsoft and FARM is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FARM 51 GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM 51 GROUP 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 FARM 51. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM 51 GROUP has no effect on the direction of Microsoft i.e., Microsoft and FARM 51 go up and down completely randomly.

Pair Corralation between Microsoft and FARM 51

Assuming the 90 days trading horizon Microsoft is expected to under-perform the FARM 51. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.22 times less risky than FARM 51. The stock trades about -0.01 of its potential returns per unit of risk. The FARM 51 GROUP is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  282.00  in FARM 51 GROUP on September 30, 2024 and sell it today you would earn a total of  10.00  from holding FARM 51 GROUP or generate 3.55% return on investment over 90 days.

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

Microsoft  vs.  FARM 51 GROUP

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) 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 January 2025.

FARM 51 GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FARM 51 GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Microsoft and FARM 51

The main advantage of trading using opposite Microsoft and FARM 51 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FARM 51 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 FARM 51 will offset losses from the drop in FARM 51's long position.

The idea behind Microsoft and FARM 51 GROUP 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.