Correlation Between Microsoft and Haier Smart
Can any of the company-specific risk be diversified away by investing in both Microsoft and Haier Smart 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 Haier Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Haier Smart Home, you can compare the effects of market volatilities on Microsoft and Haier Smart 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 Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Haier Smart.
Diversification Opportunities for Microsoft and Haier Smart
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Haier is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Microsoft i.e., Microsoft and Haier Smart go up and down completely randomly.
Pair Corralation between Microsoft and Haier Smart
Given the investment horizon of 90 days Microsoft is expected to generate 2.71 times less return on investment than Haier Smart. But when comparing it to its historical volatility, Microsoft is 2.52 times less risky than Haier Smart. It trades about 0.05 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,230 in Haier Smart Home on September 2, 2024 and sell it today you would earn a total of 100.00 from holding Haier Smart Home or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Haier Smart Home
Performance |
| Timeline |
| Microsoft |
| Haier Smart Home |
Microsoft and Haier Smart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Haier Smart
The main advantage of trading using opposite Microsoft and Haier Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Haier Smart 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 Haier Smart will offset losses from the drop in Haier Smart's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Haier Smart vs. La Z Boy Incorporated | Haier Smart vs. MasterBrand | Haier Smart vs. MillerKnoll | Haier Smart vs. Flexsteel Industries |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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