Correlation Between Insun Environment and Microfriend

Can any of the company-specific risk be diversified away by investing in both Insun Environment and Microfriend 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 Insun Environment and Microfriend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Insun Environment New and Microfriend, you can compare the effects of market volatilities on Insun Environment and Microfriend 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 Insun Environment with a short position of Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insun Environment and Microfriend.

Diversification Opportunities for Insun Environment and Microfriend

0.68

Correlation Coefficient

Insun Environment  Microfriend

Poor diversification

The 3 months correlation between Insun and Microfriend is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Insun Environment New and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend and Insun Environment 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 Insun Environment New are associated (or correlated) with Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of Insun Environment i.e., Insun Environment and Microfriend go up and down completely randomly.

Pair Corralation between Insun Environment and Microfriend

Assuming the 90 days trading horizon Insun Environment New is expected to generate 1.0 times more return on investment than Microfriend. However, Insun Environment is 1.0 times more volatile than Microfriend. It trades about 0.17 of its potential returns per unit of risk. Microfriend is currently generating about 0.11 per unit of risk. If you would invest  477,000  in Insun Environment New on October 6, 2024 and sell it today you would earn a total of  56,000  from holding Insun Environment New or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Insun Environment New  vs.  Microfriend

Insun Environment New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insun Environment New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Insun Environment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Microfriend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microfriend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Insun Environment and Microfriend

The main advantage of trading using opposite Insun Environment and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insun Environment position performs unexpectedly, Microfriend 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 Microfriend will offset losses from the drop in Microfriend's long position.

The idea behind Insun Environment New and Microfriend pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.