Correlation Between Microsoft and Hancom
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hancom 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 Hancom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hancom Inc, you can compare the effects of market volatilities on Microsoft and Hancom 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 Hancom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hancom.
Diversification Opportunities for Microsoft and Hancom
Good diversification
The 3 months correlation between Microsoft and Hancom is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hancom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hancom Inc 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 Hancom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hancom Inc has no effect on the direction of Microsoft i.e., Microsoft and Hancom go up and down completely randomly.
Pair Corralation between Microsoft and Hancom
Given the investment horizon of 90 days Microsoft is expected to generate 5.75 times less return on investment than Hancom. But when comparing it to its historical volatility, Microsoft is 4.05 times less risky than Hancom. It trades about 0.05 of its potential returns per unit of risk. Hancom Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,397,000 in Hancom Inc on September 2, 2024 and sell it today you would earn a total of 1,133,000 from holding Hancom Inc or generate 81.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.77% |
| Values | Daily Returns |
Microsoft vs. Hancom Inc
Performance |
| Timeline |
| Microsoft |
| Hancom Inc |
Microsoft and Hancom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hancom
The main advantage of trading using opposite Microsoft and Hancom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hancom 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 Hancom will offset losses from the drop in Hancom's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Hancom vs. Dongsin Engineering Construction | Hancom vs. Doosan Fuel Cell | Hancom vs. Daishin Balance 1 | Hancom vs. Total Soft Bank |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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