Correlation Between Microsoft and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Microsoft and FT Cboe 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 FT Cboe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FT Cboe Vest, you can compare the effects of market volatilities on Microsoft and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FT Cboe.
Diversification Opportunities for Microsoft and FT Cboe
Almost no diversification
The 3 months correlation between Microsoft and DNOV is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Microsoft i.e., Microsoft and FT Cboe go up and down completely randomly.
Pair Corralation between Microsoft and FT Cboe
Given the investment horizon of 90 days Microsoft is expected to generate 2.14 times more return on investment than FT Cboe. However, Microsoft is 2.14 times more volatile than FT Cboe Vest. It trades about 0.22 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.1 per unit of risk. If you would invest 37,811 in Microsoft on March 28, 2025 and sell it today you would earn a total of 11,416 from holding Microsoft or generate 30.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. FT Cboe Vest
Performance |
| Timeline |
| Microsoft |
| FT Cboe Vest |
Microsoft and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FT Cboe
The main advantage of trading using opposite Microsoft and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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