Correlation Between Microsoft and Fastenal

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

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

Diversification Opportunities for Microsoft and Fastenal

0.87

Correlation Coefficient

Microsoft  Fastenal

Very poor diversification

The 3 months correlation between Microsoft and Fastenal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Microsoft i.e., Microsoft and Fastenal go up and down completely randomly.

Pair Corralation between Microsoft and Fastenal

Given the investment horizon of 90 days Microsoft is expected to generate 1.22 times less return on investment than Fastenal. But when comparing it to its historical volatility, Microsoft is 1.17 times less risky than Fastenal. It trades about 0.23 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,132  in Fastenal Company on May 16, 2025 and sell it today you would earn a total of  756.50  from holding Fastenal Company or generate 18.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  Fastenal Company

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fastenal

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fastenal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Fastenal

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

The idea behind Microsoft and Fastenal Company 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.