Correlation Between Microsoft and Federated Strategic

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

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

Diversification Opportunities for Microsoft and Federated Strategic

-0.58

Correlation Coefficient

Microsoft  Federated Strategic

Excellent diversification

The 3 months correlation between Microsoft and Federated is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Federated Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic Value 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic Value has no effect on the direction of Microsoft i.e., Microsoft and Federated Strategic go up and down completely randomly.

Pair Corralation between Microsoft and Federated Strategic

Given the investment horizon of 90 days Microsoft is expected to generate 1.99 times more return on investment than Federated Strategic. However, Microsoft is 1.99 times more volatile than Federated Strategic Value. It trades about 0.01 of its potential returns per unit of risk. Federated Strategic Value is currently generating about -0.14 per unit of risk. If you would invest  42,944  in Microsoft on September 30, 2024 and sell it today you would earn a total of  109.00  from holding Microsoft or generate 0.25% return on investment over 90 days.

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

Microsoft  vs.  Federated Strategic Value

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Federated Strategic Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Strategic Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated 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 Federated Strategic

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

The idea behind Microsoft and Federated Strategic Value 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.