Correlation Between MicroStrategy Incorporated and Franchise

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

By analyzing existing cross correlation between MicroStrategy Incorporated and Franchise Group, you can compare the effects of market volatilities on MicroStrategy Incorporated and Franchise 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 MicroStrategy Incorporated with a short position of Franchise. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroStrategy Incorporated and Franchise.

Diversification Opportunities for MicroStrategy Incorporated and Franchise

0.71

Correlation Coefficient

MicroStrategy Incorporated  Franchise

Poor diversification

The 3 months correlation between MicroStrategy and Franchise is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group and MicroStrategy Incorporated 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 MicroStrategy Incorporated are associated (or correlated) with Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and Franchise go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and Franchise

If you would invest  32,838  in MicroStrategy Incorporated on September 14, 2024 and sell it today you would earn a total of  6,381  from holding MicroStrategy Incorporated or generate 19.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

MicroStrategy Incorporated  vs.  Franchise Group

MicroStrategy Incorporated

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MicroStrategy Incorporated and Franchise

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

The idea behind MicroStrategy Incorporated and Franchise Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.