Correlation Between Microsoft and Lien Chang
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lien Chang 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 Lien Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lien Chang Electronic, you can compare the effects of market volatilities on Microsoft and Lien Chang 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 Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lien Chang.
Diversification Opportunities for Microsoft and Lien Chang
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Lien is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic 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 Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Microsoft i.e., Microsoft and Lien Chang go up and down completely randomly.
Pair Corralation between Microsoft and Lien Chang
Given the investment horizon of 90 days Microsoft is expected to generate 0.27 times more return on investment than Lien Chang. However, Microsoft is 3.67 times less risky than Lien Chang. It trades about 0.15 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about -0.16 per unit of risk. If you would invest 40,955 in Microsoft on September 2, 2024 and sell it today you would earn a total of 1,391 from holding Microsoft or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Lien Chang Electronic
Performance |
| Timeline |
| Microsoft |
| Lien Chang Electronic |
Microsoft and Lien Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lien Chang
The main advantage of trading using opposite Microsoft and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lien Chang 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 Lien Chang will offset losses from the drop in Lien Chang's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lien Chang vs. Hitron Technologies | Lien Chang vs. Universal Microelectronics Co | Lien Chang vs. Pan International Industrial Corp | Lien Chang vs. Sunonwealth Electric Machine |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |