Correlation Between Microsoft and Fidelity Mid

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

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

Diversification Opportunities for Microsoft and Fidelity Mid

0.25

Correlation Coefficient

Microsoft  Fidelity Mid

Modest diversification

The 3 months correlation between Microsoft and Fidelity is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Mid Cap 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 Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Mid Cap has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Mid go up and down completely randomly.

Pair Corralation between Microsoft and Fidelity Mid

Given the investment horizon of 90 days Microsoft is expected to generate 0.38 times more return on investment than Fidelity Mid. However, Microsoft is 2.63 times less risky than Fidelity Mid. It trades about 0.02 of its potential returns per unit of risk. Fidelity Mid Cap is currently generating about -0.14 per unit of risk. If you would invest  43,264  in Microsoft on September 21, 2024 and sell it today you would earn a total of  433.00  from holding Microsoft or generate 1.0% return on investment over 90 days.

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

Microsoft  vs.  Fidelity Mid Cap

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Fidelity Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Microsoft and Fidelity Mid

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

The idea behind Microsoft and Fidelity Mid Cap 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.