Correlation Between Microsoft and China Fund
Can any of the company-specific risk be diversified away by investing in both Microsoft and China Fund 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 China Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and China Fund, you can compare the effects of market volatilities on Microsoft and China Fund 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 China Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and China Fund.
Diversification Opportunities for Microsoft and China Fund
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and China is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund 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 China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of Microsoft i.e., Microsoft and China Fund go up and down completely randomly.
Pair Corralation between Microsoft and China Fund
Given the investment horizon of 90 days Microsoft is expected to generate 0.75 times more return on investment than China Fund. However, Microsoft is 1.33 times less risky than China Fund. It trades about -0.04 of its potential returns per unit of risk. China Fund is currently generating about -0.19 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. China Fund
Performance |
| Timeline |
| Microsoft |
| China Fund |
Microsoft and China Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and China Fund
The main advantage of trading using opposite Microsoft and China Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, China Fund 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 China Fund will offset losses from the drop in China Fund's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| China Fund vs. Ashmore Group Plc | China Fund vs. Mexico Equity And | China Fund vs. Western Asset Managed | China Fund vs. Blackrock Muniholdings Quality |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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