Correlation Between Microsoft and Nine Dragons
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nine Dragons 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 Nine Dragons into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nine Dragons Paper, you can compare the effects of market volatilities on Microsoft and Nine Dragons 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 Nine Dragons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nine Dragons.
Diversification Opportunities for Microsoft and Nine Dragons
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Nine is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nine Dragons Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Dragons Paper 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 Nine Dragons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Dragons Paper has no effect on the direction of Microsoft i.e., Microsoft and Nine Dragons go up and down completely randomly.
Pair Corralation between Microsoft and Nine Dragons
Given the investment horizon of 90 days Microsoft is expected to generate 0.9 times more return on investment than Nine Dragons. However, Microsoft is 1.12 times less risky than Nine Dragons. It trades about 0.02 of its potential returns per unit of risk. Nine Dragons Paper is currently generating about -0.33 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. Nine Dragons Paper
Performance |
| Timeline |
| Microsoft |
| Nine Dragons Paper |
Microsoft and Nine Dragons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nine Dragons
The main advantage of trading using opposite Microsoft and Nine Dragons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nine Dragons 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 Nine Dragons will offset losses from the drop in Nine Dragons' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Nine Dragons vs. Canfor Pulp Products | Nine Dragons vs. Mondi PLC ADR | Nine Dragons vs. Nine Dragons Paper | Nine Dragons vs. Klabin Sa A |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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