Correlation Between Microsoft and China Power
Can any of the company-specific risk be diversified away by investing in both Microsoft and China Power 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 Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and China Power Equipment, you can compare the effects of market volatilities on Microsoft and China Power 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 Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and China Power.
Diversification Opportunities for Microsoft and China Power
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and China Power Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Power Equipment 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 Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Power Equipment has no effect on the direction of Microsoft i.e., Microsoft and China Power go up and down completely randomly.
Pair Corralation between Microsoft and China Power
If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. China Power Equipment
Performance |
| Timeline |
| Microsoft |
| China Power Equipment |
Microsoft and China Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and China Power
The main advantage of trading using opposite Microsoft and China Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, China Power 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 Power will offset losses from the drop in China Power's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| China Power vs. LightPath Technologies | China Power vs. Methode Electronics | China Power vs. OSI Systems | China Power vs. Plexus 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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