Correlation Between Microsoft and Wang Lee
Can any of the company-specific risk be diversified away by investing in both Microsoft and Wang Lee 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 Wang Lee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Wang Lee Group,, you can compare the effects of market volatilities on Microsoft and Wang Lee 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 Wang Lee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Wang Lee.
Diversification Opportunities for Microsoft and Wang Lee
Significant diversification
The 3 months correlation between Microsoft and Wang is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Wang Lee Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wang Lee Group, 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 Wang Lee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wang Lee Group, has no effect on the direction of Microsoft i.e., Microsoft and Wang Lee go up and down completely randomly.
Pair Corralation between Microsoft and Wang Lee
Given the investment horizon of 90 days Microsoft is expected to under-perform the Wang Lee. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 6.84 times less risky than Wang Lee. The stock trades about -0.04 of its potential returns per unit of risk. The Wang Lee Group, is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 346.00 in Wang Lee Group, on August 31, 2024 and sell it today you would earn a total of 121.00 from holding Wang Lee Group, or generate 34.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Wang Lee Group,
Performance |
| Timeline |
| Microsoft |
| Wang Lee Group, |
Microsoft and Wang Lee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Wang Lee
The main advantage of trading using opposite Microsoft and Wang Lee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Wang Lee 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 Wang Lee will offset losses from the drop in Wang Lee's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Wang Lee vs. Franklin Street Properties | Wang Lee vs. Live Ventures | Wang Lee vs. Catalent | Wang Lee vs. Merit Medical Systems |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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