Correlation Between Microsoft and Federated Mdt

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

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

Diversification Opportunities for Microsoft and Federated Mdt

0.58

Correlation Coefficient

Microsoft  Federated Mdt

Very weak diversification

The 3 months correlation between Microsoft and Federated is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Federated Mdt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Large 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Large has no effect on the direction of Microsoft i.e., Microsoft and Federated Mdt go up and down completely randomly.

Pair Corralation between Microsoft and Federated Mdt

Given the investment horizon of 90 days Microsoft is expected to generate 1.98 times more return on investment than Federated Mdt. However, Microsoft is 1.98 times more volatile than Federated Mdt Large. It trades about 0.48 of its potential returns per unit of risk. Federated Mdt Large is currently generating about 0.38 per unit of risk. If you would invest  37,093  in Microsoft on February 15, 2025 and sell it today you would earn a total of  8,220  from holding Microsoft or generate 22.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Federated Mdt Large

Microsoft

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Federated Mdt Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Mdt Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Mdt 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 Federated Mdt

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

The idea behind Microsoft and Federated Mdt Large 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..