Correlation Between Microsoft and CITIC
Can any of the company-specific risk be diversified away by investing in both Microsoft and CITIC 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 CITIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CITIC Limited, you can compare the effects of market volatilities on Microsoft and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CITIC.
Diversification Opportunities for Microsoft and CITIC
Good diversification
The 3 months correlation between Microsoft and CITIC is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Microsoft i.e., Microsoft and CITIC go up and down completely randomly.
Pair Corralation between Microsoft and CITIC
Given the investment horizon of 90 days Microsoft is expected to generate 0.81 times more return on investment than CITIC. However, Microsoft is 1.23 times less risky than CITIC. It trades about 0.02 of its potential returns per unit of risk. CITIC Limited is currently generating about -0.09 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would earn a total of 225.00 from holding Microsoft or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CITIC Limited
Performance |
| Timeline |
| Microsoft |
| CITIC Limited |
Microsoft and CITIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CITIC
The main advantage of trading using opposite Microsoft and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CITIC 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 CITIC will offset losses from the drop in CITIC's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| CITIC vs. Superior Plus Corp | CITIC vs. NMI Holdings | CITIC vs. Origin Agritech | CITIC vs. SIVERS SEMICONDUCTORS AB |
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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