Correlation Between Microsoft and Fuller Thaler

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

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

Diversification Opportunities for Microsoft and Fuller Thaler

0.14

Correlation Coefficient

Microsoft  Fuller Thaler

Average diversification

The 3 months correlation between Microsoft and Fuller is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fuller Thaler Behavioral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuller Thaler Behavioral 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 Fuller Thaler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuller Thaler Behavioral has no effect on the direction of Microsoft i.e., Microsoft and Fuller Thaler go up and down completely randomly.

Pair Corralation between Microsoft and Fuller Thaler

Given the investment horizon of 90 days Microsoft is expected to generate 1.33 times more return on investment than Fuller Thaler. However, Microsoft is 1.33 times more volatile than Fuller Thaler Behavioral. It trades about 0.09 of its potential returns per unit of risk. Fuller Thaler Behavioral is currently generating about 0.08 per unit of risk. If you would invest  24,341  in Microsoft on August 29, 2024 and sell it today you would earn a total of  18,458  from holding Microsoft or generate 75.83% return on investment over 90 days.

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

Microsoft  vs.  Fuller Thaler Behavioral

Microsoft

Risk-Adjusted Performance

4 of 100

Weak

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

Fuller Thaler Behavioral

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fuller Thaler Behavioral are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fuller Thaler may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Microsoft and Fuller Thaler

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

The idea behind Microsoft and Fuller Thaler Behavioral 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.