Correlation Between Microsoft and Yufo Electronics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Yufo Electronics 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 Yufo Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Yufo Electronics Co, you can compare the effects of market volatilities on Microsoft and Yufo Electronics 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 Yufo Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Yufo Electronics.
Diversification Opportunities for Microsoft and Yufo Electronics
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Yufo is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Yufo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yufo Electronics 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 Yufo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yufo Electronics has no effect on the direction of Microsoft i.e., Microsoft and Yufo Electronics go up and down completely randomly.
Pair Corralation between Microsoft and Yufo Electronics
Given the investment horizon of 90 days Microsoft is expected to generate 1.15 times less return on investment than Yufo Electronics. But when comparing it to its historical volatility, Microsoft is 1.63 times less risky than Yufo Electronics. It trades about 0.08 of its potential returns per unit of risk. Yufo Electronics Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,251 in Yufo Electronics Co on September 1, 2024 and sell it today you would earn a total of 1,534 from holding Yufo Electronics Co or generate 68.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.97% |
| Values | Daily Returns |
Microsoft vs. Yufo Electronics Co
Performance |
| Timeline |
| Microsoft |
| Yufo Electronics |
Microsoft and Yufo Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Yufo Electronics
The main advantage of trading using opposite Microsoft and Yufo Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Yufo Electronics 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 Yufo Electronics will offset losses from the drop in Yufo Electronics' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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