Correlation Between Microsoft Corp and FBR ASSET

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Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and FBR ASSET 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 Corp and FBR ASSET into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp and FBR ASSET INVESTMENT, you can compare the effects of market volatilities on Microsoft Corp and FBR ASSET 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 Corp with a short position of FBR ASSET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and FBR ASSET.

Diversification Opportunities for Microsoft Corp and FBR ASSET

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Microsoft and FBR ASSET is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and FBR ASSET INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FBR ASSET INVESTMENT and Microsoft Corp 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 Corp are associated (or correlated) with FBR ASSET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FBR ASSET INVESTMENT has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and FBR ASSET go up and down completely randomly.

Pair Corralation between Microsoft Corp and FBR ASSET

Given the investment horizon of 90 days Microsoft Corp is expected to generate 0.58 times more return on investment than FBR ASSET. However, Microsoft Corp is 1.73 times less risky than FBR ASSET. It trades about 0.05 of its potential returns per unit of risk. FBR ASSET INVESTMENT is currently generating about -0.03 per unit of risk. If you would invest  22,662  in Microsoft Corp on May 18, 2022 and sell it today you would earn a total of  6,600  from holding Microsoft Corp or generate 29.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.7%
ValuesDaily Returns

Microsoft Corp  vs.  FBR ASSET INVESTMENT

 Performance (%) 
       Timeline  
Microsoft Corp 
Microsoft Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish technical and fundamental indicators, Microsoft Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft Price Channel

FBR ASSET INVESTMENT 
FBR ASSET Performance
0 of 100
Over the last 90 days FBR ASSET INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Microsoft Corp and FBR ASSET Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and FBR ASSET

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

FBR ASSET INVESTMENT

Pair trading matchups for FBR ASSET

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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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