Correlation Between Microsoft and Crown Asia
Can any of the company-specific risk be diversified away by investing in both Microsoft and Crown Asia 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 Crown Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Crown Asia Chemicals, you can compare the effects of market volatilities on Microsoft and Crown Asia 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 Crown Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Crown Asia.
Diversification Opportunities for Microsoft and Crown Asia
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Crown is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Crown Asia Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Asia Chemicals 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 Crown Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Asia Chemicals has no effect on the direction of Microsoft i.e., Microsoft and Crown Asia go up and down completely randomly.
Pair Corralation between Microsoft and Crown Asia
Given the investment horizon of 90 days Microsoft is expected to generate 0.85 times more return on investment than Crown Asia. However, Microsoft is 1.18 times less risky than Crown Asia. It trades about -0.04 of its potential returns per unit of risk. Crown Asia Chemicals is currently generating about -0.16 per unit of risk. If you would invest 42,388 in Microsoft on August 25, 2024 and sell it today you would lose (688.00) from holding Microsoft or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Crown Asia Chemicals
Performance |
| Timeline |
| Microsoft |
| Crown Asia Chemicals |
Microsoft and Crown Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Crown Asia
The main advantage of trading using opposite Microsoft and Crown Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Crown Asia 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 Crown Asia will offset losses from the drop in Crown Asia's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Crown Asia vs. Allhome Corp | Crown Asia vs. Jollibee Foods Corp | Crown Asia vs. LFM Properties Corp | Crown Asia vs. PXP Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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