Correlation Between Microsoft and Futuretech

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

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

Diversification Opportunities for Microsoft and Futuretech

0.63

Correlation Coefficient

Microsoft  Futuretech

Poor diversification

The 3 months correlation between Microsoft and Futuretech is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Futuretech II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futuretech II Acquisition 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 Futuretech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futuretech II Acquisition has no effect on the direction of Microsoft i.e., Microsoft and Futuretech go up and down completely randomly.

Pair Corralation between Microsoft and Futuretech

Given the investment horizon of 90 days Microsoft is expected to generate 0.91 times more return on investment than Futuretech. However, Microsoft is 1.09 times less risky than Futuretech. It trades about 0.05 of its potential returns per unit of risk. Futuretech II Acquisition is currently generating about 0.02 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  1,743  from holding Microsoft or generate 4.01% return on investment over 90 days.

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

Microsoft  vs.  Futuretech II Acquisition

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Futuretech II Acquisition

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Futuretech II Acquisition are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Futuretech is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Futuretech

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

The idea behind Microsoft and Futuretech II Acquisition 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.