Correlation Between Microsoft and Franklin Dynatech

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

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

Diversification Opportunities for Microsoft and Franklin Dynatech

0.71

Correlation Coefficient

Microsoft  Franklin Dynatech

Poor diversification

The 3 months correlation between Microsoft and Franklin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Franklin Dynatech Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Dynatech 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 Franklin Dynatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Dynatech has no effect on the direction of Microsoft i.e., Microsoft and Franklin Dynatech go up and down completely randomly.

Pair Corralation between Microsoft and Franklin Dynatech

Given the investment horizon of 90 days Microsoft is expected to generate 1.0 times less return on investment than Franklin Dynatech. In addition to that, Microsoft is 1.09 times more volatile than Franklin Dynatech Fund. It trades about 0.08 of its total potential returns per unit of risk. Franklin Dynatech Fund is currently generating about 0.09 per unit of volatility. If you would invest  7,732  in Franklin Dynatech Fund on September 28, 2024 and sell it today you would earn a total of  6,399  from holding Franklin Dynatech Fund or generate 82.76% return on investment over 90 days.

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

Microsoft  vs.  Franklin Dynatech Fund

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.

Franklin Dynatech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Dynatech Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Dynatech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and Franklin Dynatech

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

The idea behind Microsoft and Franklin Dynatech Fund 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.

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 the Money Managers module to screen money managers from public funds and ETFs managed around the world.