Correlation Between Microsoft and Source FTSE

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

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

Diversification Opportunities for Microsoft and Source FTSE

0.0

Correlation Coefficient

Microsoft  Source FTSE

Pay attention - limited upside

The 3 months correlation between Microsoft and Source is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Source FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source FTSE RAFI 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 Source FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source FTSE RAFI has no effect on the direction of Microsoft i.e., Microsoft and Source FTSE go up and down completely randomly.

Pair Corralation between Microsoft and Source FTSE

If you would invest (100.00) in Source FTSE RAFI on September 29, 2024 and sell it today you would earn a total of  100.00  from holding Source FTSE RAFI or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Source FTSE RAFI

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 technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Source FTSE RAFI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Microsoft and Source FTSE

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

The idea behind Microsoft and Source FTSE RAFI 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.