Correlation Between Microsoft and CSPC Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Microsoft and CSPC Pharmaceutical 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 CSPC Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CSPC Pharmaceutical Group, you can compare the effects of market volatilities on Microsoft and CSPC Pharmaceutical 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 CSPC Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CSPC Pharmaceutical.
Diversification Opportunities for Microsoft and CSPC Pharmaceutical
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and CSPC is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CSPC Pharmaceutical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSPC Pharmaceutical 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 CSPC Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSPC Pharmaceutical has no effect on the direction of Microsoft i.e., Microsoft and CSPC Pharmaceutical go up and down completely randomly.
Pair Corralation between Microsoft and CSPC Pharmaceutical
Given the investment horizon of 90 days Microsoft is expected to generate 0.22 times more return on investment than CSPC Pharmaceutical. However, Microsoft is 4.45 times less risky than CSPC Pharmaceutical. It trades about 0.07 of its potential returns per unit of risk. CSPC Pharmaceutical Group is currently generating about -0.01 per unit of risk. If you would invest 30,443 in Microsoft on August 30, 2024 and sell it today you would earn a total of 11,856 from holding Microsoft or generate 38.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 45.94% |
| Values | Daily Returns |
Microsoft vs. CSPC Pharmaceutical Group
Performance |
| Timeline |
| Microsoft |
| CSPC Pharmaceutical |
Microsoft and CSPC Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CSPC Pharmaceutical
The main advantage of trading using opposite Microsoft and CSPC Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CSPC Pharmaceutical 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 CSPC Pharmaceutical will offset losses from the drop in CSPC Pharmaceutical's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| CSPC Pharmaceutical vs. Ono Pharmaceutical Co | CSPC Pharmaceutical vs. Grifols SA ADR | CSPC Pharmaceutical vs. Pfizer Inc | CSPC Pharmaceutical vs. Northann Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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