Correlation Between Microsoft and Fobi AI

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

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

Diversification Opportunities for Microsoft and Fobi AI

0.07

Correlation Coefficient

Microsoft  Fobi AI

Significant diversification

The 3 months correlation between Microsoft and Fobi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fobi AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fobi AI 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 Fobi AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fobi AI has no effect on the direction of Microsoft i.e., Microsoft and Fobi AI go up and down completely randomly.

Pair Corralation between Microsoft and Fobi AI

Given the investment horizon of 90 days Microsoft is expected to generate 0.26 times more return on investment than Fobi AI. However, Microsoft is 3.83 times less risky than Fobi AI. It trades about 0.04 of its potential returns per unit of risk. Fobi AI is currently generating about -0.11 per unit of risk. If you would invest  43,428  in Microsoft on September 17, 2024 and sell it today you would earn a total of  1,299  from holding Microsoft or generate 2.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Microsoft  vs.  Fobi AI

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Fobi AI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fobi AI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Microsoft and Fobi AI

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

The idea behind Microsoft and Fobi AI 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.