Correlation Between Microsoft and Federated Government
Can any of the company-specific risk be diversified away by investing in both Microsoft and Federated Government 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 Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Federated Government Income, you can compare the effects of market volatilities on Microsoft and Federated Government 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 Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Federated Government.
Diversification Opportunities for Microsoft and Federated Government
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Federated is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Federated Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government 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 Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Microsoft i.e., Microsoft and Federated Government go up and down completely randomly.
Pair Corralation between Microsoft and Federated Government
Given the investment horizon of 90 days Microsoft is expected to under-perform the Federated Government. In addition to that, Microsoft is 5.0 times more volatile than Federated Government Income. It trades about -0.04 of its total potential returns per unit of risk. Federated Government Income is currently generating about 0.16 per unit of volatility. If you would invest 897.00 in Federated Government Income on September 3, 2025 and sell it today you would earn a total of 21.00 from holding Federated Government Income or generate 2.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Federated Government Income
Performance |
| Timeline |
| Microsoft |
| Federated Government |
Microsoft and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Federated Government
The main advantage of trading using opposite Microsoft and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Federated Government 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 Government will offset losses from the drop in Federated Government's long position.| Microsoft vs. Kossan Rubber Industries | Microsoft vs. China Life Insurance | Microsoft vs. Vienna Insurance Group | Microsoft vs. White Mountains Insurance |
| Federated Government vs. Doubleline Emerging Markets | Federated Government vs. Arrow Managed Futures | Federated Government vs. Federated Municipal High | Federated Government vs. Aqr Sustainable Long Short |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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