Correlation Between Microsoft and China Water
Can any of the company-specific risk be diversified away by investing in both Microsoft and China Water 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 China Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and China Water Industry, you can compare the effects of market volatilities on Microsoft and China Water 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 China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and China Water.
Diversification Opportunities for Microsoft and China Water
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and China is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and China Water Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Industry 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 China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Industry has no effect on the direction of Microsoft i.e., Microsoft and China Water go up and down completely randomly.
Pair Corralation between Microsoft and China Water
If you would invest 3.99 in China Water Industry on October 15, 2024 and sell it today you would earn a total of 0.00 from holding China Water Industry or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 93.75% |
| Values | Daily Returns |
Microsoft vs. China Water Industry
Performance |
| Timeline |
| Microsoft |
| China Water Industry |
Microsoft and China Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and China Water
The main advantage of trading using opposite Microsoft and China Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, China Water 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 China Water will offset losses from the drop in China Water's long position.| Microsoft vs. Vishay Intertechnology | Microsoft vs. Pebblebrook Hotel Trust | Microsoft vs. The Hongkong and | Microsoft vs. Playa Hotels Resorts |
| China Water vs. Apple Inc | China Water vs. Apple Inc | China Water vs. Apple Inc | China Water vs. Apple Inc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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