Correlation Between Microsoft and Fidelity Strategic

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

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

Diversification Opportunities for Microsoft and Fidelity Strategic

0.1

Correlation Coefficient

Microsoft  Fidelity Strategic

Average diversification

The 3 months correlation between Microsoft and Fidelity is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity Strategic Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Strategic 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Strategic has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Strategic go up and down completely randomly.

Pair Corralation between Microsoft and Fidelity Strategic

Given the investment horizon of 90 days Microsoft is expected to under-perform the Fidelity Strategic. In addition to that, Microsoft is 2.55 times more volatile than Fidelity Strategic Dividend. It trades about -0.08 of its total potential returns per unit of risk. Fidelity Strategic Dividend is currently generating about 0.06 per unit of volatility. If you would invest  1,671  in Fidelity Strategic Dividend on December 28, 2024 and sell it today you would earn a total of  33.00  from holding Fidelity Strategic Dividend or generate 1.97% return on investment over 90 days.

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

Microsoft  vs.  Fidelity Strategic Dividend

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 Strategic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Strategic Dividend are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fidelity Strategic 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 Strategic

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

The idea behind Microsoft and Fidelity Strategic Dividend 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.

Check out your portfolio center.

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.