Correlation Between Microsoft and Fobi AI

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

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

Diversification Opportunities for Microsoft and Fobi AI

-0.03

Correlation Coefficient

Microsoft  Fobi AI

Good diversification

The 3 months correlation between Microsoft and Fobi is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fobi AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fobi AI 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 Fobi AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fobi AI has no effect on the direction of Microsoft i.e., Microsoft and Fobi AI go up and down completely randomly.

Pair Corralation between Microsoft and Fobi AI

Given the investment horizon of 90 days Microsoft is expected to under-perform the Fobi AI. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 51.22 times less risky than Fobi AI. The stock trades about -0.08 of its potential returns per unit of risk. The Fobi AI is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.30  in Fobi AI on December 29, 2024 and sell it today you would lose (0.20) from holding Fobi AI or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Microsoft  vs.  Fobi AI

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.

Fobi AI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fobi AI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Fobi AI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Fobi AI

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

The idea behind Microsoft and Fobi AI 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.