Correlation Between Microsoft and Five9
Can any of the company-specific risk be diversified away by investing in both Microsoft and Five9 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 Five9 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Five9 Inc, you can compare the effects of market volatilities on Microsoft and Five9 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 Five9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Five9.
Diversification Opportunities for Microsoft and Five9
Excellent diversification
The 3 months correlation between Microsoft and Five9 is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Five9 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five9 Inc 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 Five9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five9 Inc has no effect on the direction of Microsoft i.e., Microsoft and Five9 go up and down completely randomly.
Pair Corralation between Microsoft and Five9
Given the investment horizon of 90 days Microsoft is expected to generate 0.45 times more return on investment than Five9. However, Microsoft is 2.2 times less risky than Five9. It trades about 0.09 of its potential returns per unit of risk. Five9 Inc is currently generating about 0.01 per unit of risk. If you would invest 31,198 in Microsoft on January 19, 2024 and sell it today you would earn a total of 9,229 from holding Microsoft or generate 29.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Five9 Inc
Performance |
| Timeline |
| Microsoft |
| Five9 Inc |
Microsoft and Five9 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Five9
The main advantage of trading using opposite Microsoft and Five9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Five9 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 Five9 will offset losses from the drop in Five9's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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