Correlation Between Microsoft and Fubon Hang
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fubon Hang 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 Fubon Hang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fubon Hang Seng, you can compare the effects of market volatilities on Microsoft and Fubon Hang 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 Fubon Hang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fubon Hang.
Diversification Opportunities for Microsoft and Fubon Hang
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Fubon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fubon Hang Seng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Hang Seng 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 Fubon Hang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Hang Seng has no effect on the direction of Microsoft i.e., Microsoft and Fubon Hang go up and down completely randomly.
Pair Corralation between Microsoft and Fubon Hang
Given the investment horizon of 90 days Microsoft is expected to under-perform the Fubon Hang. In addition to that, Microsoft is 1.19 times more volatile than Fubon Hang Seng. It trades about -0.04 of its total potential returns per unit of risk. Fubon Hang Seng is currently generating about 0.24 per unit of volatility. If you would invest 1,204 in Fubon Hang Seng on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Fubon Hang Seng or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Fubon Hang Seng
Performance |
| Timeline |
| Microsoft |
| Fubon Hang Seng |
Microsoft and Fubon Hang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fubon Hang
The main advantage of trading using opposite Microsoft and Fubon Hang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fubon Hang 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 Fubon Hang will offset losses from the drop in Fubon Hang's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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