Correlation Between Microsoft and First Investors

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

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

Diversification Opportunities for Microsoft and First Investors

0.53

Correlation Coefficient

Microsoft  First Investors

Very weak diversification

The 3 months correlation between Microsoft and First is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and First Investors Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Select 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 First Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Investors Select has no effect on the direction of Microsoft i.e., Microsoft and First Investors go up and down completely randomly.

Pair Corralation between Microsoft and First Investors

Given the investment horizon of 90 days Microsoft is expected to generate 1.31 times more return on investment than First Investors. However, Microsoft is 1.31 times more volatile than First Investors Select. It trades about 0.22 of its potential returns per unit of risk. First Investors Select is currently generating about 0.19 per unit of risk. If you would invest  45,887  in Microsoft on May 17, 2025 and sell it today you would earn a total of  6,361  from holding Microsoft or generate 13.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  First Investors Select

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 17 (%) 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.

First Investors Select

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Investors Select are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, First Investors may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Microsoft and First Investors

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

The idea behind Microsoft and First Investors Select 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.