Correlation Between Microsoft and Federated Short-intermedia

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

By analyzing existing cross correlation between Microsoft and Federated Short Intermediate Duration, you can compare the effects of market volatilities on Microsoft and Federated Short-intermedia 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 Federated Short-intermedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Federated Short-intermedia.

Diversification Opportunities for Microsoft and Federated Short-intermedia

-0.35

Correlation Coefficient

Microsoft  Federated Short-intermedia

Very good diversification

The 3 months correlation between Microsoft and Federated is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Federated Short Intermediate D in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short-intermedia 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 Federated Short-intermedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short-intermedia has no effect on the direction of Microsoft i.e., Microsoft and Federated Short-intermedia go up and down completely randomly.

Pair Corralation between Microsoft and Federated Short-intermedia

Given the investment horizon of 90 days Microsoft is expected to under-perform the Federated Short-intermedia. In addition to that, Microsoft is 12.26 times more volatile than Federated Short Intermediate Duration. It trades about -0.08 of its total potential returns per unit of risk. Federated Short Intermediate Duration is currently generating about 0.06 per unit of volatility. If you would invest  999.00  in Federated Short Intermediate Duration on December 1, 2024 and sell it today you would earn a total of  4.00  from holding Federated Short Intermediate Duration or generate 0.4% return on investment over 90 days.

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

Microsoft  vs.  Federated Short Intermediate D

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.

Federated Short-intermedia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Short Intermediate Duration are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated Short-intermedia 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 Federated Short-intermedia

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

The idea behind Microsoft and Federated Short Intermediate Duration 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.