Correlation Between Microsoft and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Microsoft and Franklin Mutual 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 Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Franklin Mutual Quest, you can compare the effects of market volatilities on Microsoft and Franklin Mutual 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 Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Franklin Mutual.
Diversification Opportunities for Microsoft and Franklin Mutual
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Franklin is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Franklin Mutual Quest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Quest 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 Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Quest has no effect on the direction of Microsoft i.e., Microsoft and Franklin Mutual go up and down completely randomly.
Pair Corralation between Microsoft and Franklin Mutual
Given the investment horizon of 90 days Microsoft is expected to generate 1.78 times more return on investment than Franklin Mutual. However, Microsoft is 1.78 times more volatile than Franklin Mutual Quest. It trades about 0.03 of its potential returns per unit of risk. Franklin Mutual Quest is currently generating about -0.14 per unit of risk. If you would invest 43,125 in Microsoft on September 25, 2024 and sell it today you would earn a total of 808.00 from holding Microsoft or generate 1.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Franklin Mutual Quest
Performance |
Timeline |
Microsoft |
Franklin Mutual Quest |
Microsoft and Franklin Mutual Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Franklin Mutual
The main advantage of trading using opposite Microsoft and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Franklin Mutual 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 Franklin Mutual will offset losses from the drop in Franklin Mutual's long position.Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
Franklin Mutual vs. Franklin Mutual Beacon | Franklin Mutual vs. Templeton Developing Markets | Franklin Mutual vs. Franklin Mutual Global | Franklin Mutual vs. Franklin Mutual Global |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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