Correlation Between Microsoft and Fidelity Series

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

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

Diversification Opportunities for Microsoft and Fidelity Series

0.53

Correlation Coefficient

Microsoft  Fidelity Series

Very weak diversification

The 3 months correlation between Microsoft and Fidelity is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fidelity Series Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series Canada 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 Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series Canada has no effect on the direction of Microsoft i.e., Microsoft and Fidelity Series go up and down completely randomly.

Pair Corralation between Microsoft and Fidelity Series

Given the investment horizon of 90 days Microsoft is expected to under-perform the Fidelity Series. In addition to that, Microsoft is 1.73 times more volatile than Fidelity Series Canada. It trades about -0.17 of its total potential returns per unit of risk. Fidelity Series Canada is currently generating about -0.11 per unit of volatility. If you would invest  1,531  in Fidelity Series Canada on February 3, 2024 and sell it today you would lose (30.00) from holding Fidelity Series Canada or give up 1.96% of portfolio value over 90 days.

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

Microsoft  vs.  Fidelity Series Canada

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Fidelity Series Canada

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Canada are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Fidelity Series

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

The idea behind Microsoft and Fidelity Series Canada 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.