Correlation Between Microsoft and Five Star

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Microsoft and Five Star 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 Five Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Five Star Bancorp, you can compare the effects of market volatilities on Microsoft and Five Star 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 Five Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Five Star.

Diversification Opportunities for Microsoft and Five Star

-0.81
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Microsoft and Five is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp 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 Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of Microsoft i.e., Microsoft and Five Star go up and down completely randomly.

Pair Corralation between Microsoft and Five Star

Given the investment horizon of 90 days Microsoft is expected to generate 1.04 times less return on investment than Five Star. But when comparing it to its historical volatility, Microsoft is 1.31 times less risky than Five Star. It trades about 0.12 of its potential returns per unit of risk. Five Star Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,301  in Five Star Bancorp on December 29, 2023 and sell it today you would earn a total of  79.00  from holding Five Star Bancorp or generate 3.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  Five Star Bancorp

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Five Star Bancorp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Five Star Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Microsoft and Five Star Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Five Star

The main advantage of trading using opposite Microsoft and Five Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Five Star 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 Five Star will offset losses from the drop in Five Star's long position.
The idea behind Microsoft and Five Star Bancorp 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.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

Other Complementary Tools

Fundamental Analysis
View fundamental data based on most recent published financial statements
Earnings Calls
Check upcoming earnings announcements updated hourly across public exchanges
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum