Correlation Between Ming Le and Microsoft
Can any of the company-specific risk be diversified away by investing in both Ming Le and Microsoft 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 Ming Le and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ming Le Sports and Microsoft, you can compare the effects of market volatilities on Ming Le and Microsoft 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 Ming Le with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Le and Microsoft.
Diversification Opportunities for Ming Le and Microsoft
Weak diversification
The 3 months correlation between Ming and Microsoft is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ming Le Sports and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Ming Le 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 Ming Le Sports are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Ming Le i.e., Ming Le and Microsoft go up and down completely randomly.
Pair Corralation between Ming Le and Microsoft
Assuming the 90 days trading horizon Ming Le is expected to generate 3.89 times less return on investment than Microsoft. In addition to that, Ming Le is 1.57 times more volatile than Microsoft. It trades about 0.01 of its total potential returns per unit of risk. Microsoft is currently generating about 0.08 per unit of volatility. If you would invest 27,625 in Microsoft on August 29, 2024 and sell it today you would earn a total of 12,975 from holding Microsoft or generate 46.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ming Le Sports vs. Microsoft
Performance |
| Timeline |
| Ming Le Sports |
| Microsoft |
Ming Le and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ming Le and Microsoft
The main advantage of trading using opposite Ming Le and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ming Le position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.The idea behind Ming Le Sports and Microsoft 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.| Microsoft vs. Pentair plc | Microsoft vs. NORWEGIAN AIR SHUT | Microsoft vs. GEAR4MUSIC LS 10 | Microsoft vs. Fair Isaac Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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