Correlation Between Microsoft and Foxx Development

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

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

Diversification Opportunities for Microsoft and Foxx Development

0.14

Correlation Coefficient

Microsoft  Foxx Development

Average diversification

The 3 months correlation between Microsoft and Foxx is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Foxx Development Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foxx Development Holdings 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 Foxx Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foxx Development Holdings has no effect on the direction of Microsoft i.e., Microsoft and Foxx Development go up and down completely randomly.

Pair Corralation between Microsoft and Foxx Development

Given the investment horizon of 90 days Microsoft is expected to generate 91.51 times less return on investment than Foxx Development. But when comparing it to its historical volatility, Microsoft is 25.93 times less risky than Foxx Development. It trades about 0.03 of its potential returns per unit of risk. Foxx Development Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Foxx Development Holdings on September 24, 2024 and sell it today you would lose (7.00) from holding Foxx Development Holdings or give up 30.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.13%
Values	Daily Returns

Microsoft  vs.  Foxx Development Holdings

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Foxx Development Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foxx Development Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Foxx Development showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Foxx Development

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

The idea behind Microsoft and Foxx Development Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.