Correlation Between Microsoft and Funko

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

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

Diversification Opportunities for Microsoft and Funko

0.72

Correlation Coefficient

Microsoft  Funko

Poor diversification

The 3 months correlation between Microsoft and Funko is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko Inc 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 Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Microsoft i.e., Microsoft and Funko go up and down completely randomly.

Pair Corralation between Microsoft and Funko

Given the investment horizon of 90 days Microsoft is expected to generate 0.46 times more return on investment than Funko. However, Microsoft is 2.17 times less risky than Funko. It trades about -0.08 of its potential returns per unit of risk. Funko Inc is currently generating about -0.3 per unit of risk. If you would invest  42,398  in Microsoft on December 29, 2024 and sell it today you would lose (3,340) from holding Microsoft or give up 7.88% of portfolio value over 90 days.

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

Microsoft  vs.  Funko Inc

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.

Funko Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Funko Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Microsoft and Funko

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

The idea behind Microsoft and Funko Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.