Correlation Between Microsoft and Yatsen Holding
Can any of the company-specific risk be diversified away by investing in both Microsoft and Yatsen Holding 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 Yatsen Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Yatsen Holding, you can compare the effects of market volatilities on Microsoft and Yatsen Holding 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 Yatsen Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Yatsen Holding.
Diversification Opportunities for Microsoft and Yatsen Holding
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Yatsen is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Yatsen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yatsen Holding 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 Yatsen Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yatsen Holding has no effect on the direction of Microsoft i.e., Microsoft and Yatsen Holding go up and down completely randomly.
Pair Corralation between Microsoft and Yatsen Holding
Given the investment horizon of 90 days Microsoft is expected to generate 0.31 times more return on investment than Yatsen Holding. However, Microsoft is 3.19 times less risky than Yatsen Holding. It trades about 0.09 of its potential returns per unit of risk. Yatsen Holding is currently generating about 0.01 per unit of risk. If you would invest 24,042 in Microsoft on August 28, 2024 and sell it today you would earn a total of 18,757 from holding Microsoft or generate 78.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Yatsen Holding
Performance |
| Timeline |
| Microsoft |
| Yatsen Holding |
Microsoft and Yatsen Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Yatsen Holding
The main advantage of trading using opposite Microsoft and Yatsen Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Yatsen Holding 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 Yatsen Holding will offset losses from the drop in Yatsen Holding's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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