Correlation Between Microsoft and Zepp Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and Zepp Health 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 Zepp Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Zepp Health Corp, you can compare the effects of market volatilities on Microsoft and Zepp Health 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 Zepp Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Zepp Health.
Diversification Opportunities for Microsoft and Zepp Health
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Zepp is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Zepp Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zepp Health Corp 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 Zepp Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zepp Health Corp has no effect on the direction of Microsoft i.e., Microsoft and Zepp Health go up and down completely randomly.
Pair Corralation between Microsoft and Zepp Health
Given the investment horizon of 90 days Microsoft is expected to generate 0.25 times more return on investment than Zepp Health. However, Microsoft is 3.98 times less risky than Zepp Health. It trades about -0.02 of its potential returns per unit of risk. Zepp Health Corp is currently generating about -0.01 per unit of risk. If you would invest 42,869 in Microsoft on August 24, 2024 and sell it today you would lose (1,582) from holding Microsoft or give up 3.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Zepp Health Corp
Performance |
| Timeline |
| Microsoft |
| Zepp Health Corp |
Microsoft and Zepp Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Zepp Health
The main advantage of trading using opposite Microsoft and Zepp Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Zepp Health 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 Zepp Health will offset losses from the drop in Zepp Health's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Zepp Health vs. VOXX International | Zepp Health vs. LG Display Co | Zepp Health vs. Vizio Holding Corp | Zepp Health vs. Turtle Beach 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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