Correlation Between Microsoft and Fundvantage Trust

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

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

Diversification Opportunities for Microsoft and Fundvantage Trust

0.35

Correlation Coefficient

Microsoft  Fundvantage Trust

Weak diversification

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

Pair Corralation between Microsoft and Fundvantage Trust

Given the investment horizon of 90 days Microsoft is expected to generate 6.19 times more return on investment than Fundvantage Trust. However, Microsoft is 6.19 times more volatile than Fundvantage Trust . It trades about 0.23 of its potential returns per unit of risk. Fundvantage Trust is currently generating about 0.19 per unit of risk. If you would invest  42,435  in Microsoft on September 14, 2024 and sell it today you would earn a total of  2,302  from holding Microsoft or generate 5.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Fundvantage Trust

Microsoft

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Fundvantage Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fundvantage Trust are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fundvantage Trust 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 Fundvantage Trust

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

The idea behind Microsoft and Fundvantage Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.