Correlation Between Microsoft and WooriNet
Can any of the company-specific risk be diversified away by investing in both Microsoft and WooriNet 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 WooriNet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and WooriNet, you can compare the effects of market volatilities on Microsoft and WooriNet 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 WooriNet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and WooriNet.
Diversification Opportunities for Microsoft and WooriNet
Very good diversification
The 3 months correlation between Microsoft and WooriNet is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and WooriNet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WooriNet 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 WooriNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WooriNet has no effect on the direction of Microsoft i.e., Microsoft and WooriNet go up and down completely randomly.
Pair Corralation between Microsoft and WooriNet
Given the investment horizon of 90 days Microsoft is expected to under-perform the WooriNet. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.12 times less risky than WooriNet. The stock trades about -0.33 of its potential returns per unit of risk. The WooriNet is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 736,000 in WooriNet on November 29, 2024 and sell it today you would lose (9,000) from holding WooriNet or give up 1.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Microsoft vs. WooriNet
Performance |
| Timeline |
| Microsoft |
| WooriNet |
Microsoft and WooriNet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and WooriNet
The main advantage of trading using opposite Microsoft and WooriNet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, WooriNet 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 WooriNet will offset losses from the drop in WooriNet's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| WooriNet vs. Daejoo Electronic Materials | WooriNet vs. Incar Financial Service | WooriNet vs. PI Advanced Materials | WooriNet vs. Neungyule Education |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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