Correlation Between Microsoft and Yuanta SP
Can any of the company-specific risk be diversified away by investing in both Microsoft and Yuanta SP 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 Yuanta SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Yuanta SP GSCI, you can compare the effects of market volatilities on Microsoft and Yuanta SP 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 Yuanta SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Yuanta SP.
Diversification Opportunities for Microsoft and Yuanta SP
Average diversification
The 3 months correlation between Microsoft and Yuanta is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Yuanta SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta SP GSCI 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 Yuanta SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta SP GSCI has no effect on the direction of Microsoft i.e., Microsoft and Yuanta SP go up and down completely randomly.
Pair Corralation between Microsoft and Yuanta SP
Given the investment horizon of 90 days Microsoft is expected to generate 1.65 times more return on investment than Yuanta SP. However, Microsoft is 1.65 times more volatile than Yuanta SP GSCI. It trades about 0.1 of its potential returns per unit of risk. Yuanta SP GSCI is currently generating about 0.06 per unit of risk. If you would invest 22,345 in Microsoft on August 31, 2024 and sell it today you would earn a total of 20,001 from holding Microsoft or generate 89.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.23% |
| Values | Daily Returns |
Microsoft vs. Yuanta SP GSCI
Performance |
| Timeline |
| Microsoft |
| Yuanta SP GSCI |
Microsoft and Yuanta SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Yuanta SP
The main advantage of trading using opposite Microsoft and Yuanta SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Yuanta SP 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 Yuanta SP will offset losses from the drop in Yuanta SP's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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