Correlation Between Microsoft and Fidelity Flex

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

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

Diversification Opportunities for Microsoft and Fidelity Flex

-0.85

Correlation Coefficient

Microsoft  Fidelity Flex

Pay attention - limited upside

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 Flex Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Flex Bond 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 Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Flex Bond has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Flex go up and down completely randomly.

Pair Corralation between Microsoft and Fidelity Flex

Given the investment horizon of 90 days Microsoft is expected to under-perform the Fidelity Flex. In addition to that, Microsoft is 5.39 times more volatile than Fidelity Flex Bond. It trades about -0.11 of its total potential returns per unit of risk. Fidelity Flex Bond is currently generating about 0.13 per unit of volatility. If you would invest  891.00  in Fidelity Flex Bond on December 30, 2024 and sell it today you would earn a total of  21.00  from holding Fidelity Flex Bond or generate 2.36% return on investment over 90 days.

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

Microsoft  vs.  Fidelity Flex Bond

Microsoft

Risk-Adjusted Performance

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fidelity Flex Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Flex Bond are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Flex 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 Flex

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

The idea behind Microsoft and Fidelity Flex Bond 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.