Correlation Between Microsoft and Cango
Can any of the company-specific risk be diversified away by investing in both Microsoft and Cango 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 Cango into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Cango Inc, you can compare the effects of market volatilities on Microsoft and Cango 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 Cango. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Cango.
Diversification Opportunities for Microsoft and Cango
Good diversification
The 3 months correlation between Microsoft and Cango is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cango Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cango 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 Cango. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cango Inc has no effect on the direction of Microsoft i.e., Microsoft and Cango go up and down completely randomly.
Pair Corralation between Microsoft and Cango
Given the investment horizon of 90 days Microsoft is expected to under-perform the Cango. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 5.62 times less risky than Cango. The stock trades about -0.06 of its potential returns per unit of risk. The Cango Inc is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 180.00 in Cango Inc on August 24, 2024 and sell it today you would earn a total of 210.00 from holding Cango Inc or generate 116.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Cango Inc
Performance |
| Timeline |
| Microsoft |
| Cango Inc |
Microsoft and Cango Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Cango
The main advantage of trading using opposite Microsoft and Cango positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Cango 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 Cango will offset losses from the drop in Cango's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Cango vs. Cars Inc | Cango vs. KAR Auction Services | Cango vs. Rush Enterprises B | Cango vs. Rush Enterprises A |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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