Correlation Between Mobile Appliance and Microfriend

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

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

Diversification Opportunities for Mobile Appliance and Microfriend

0.39

Correlation Coefficient

Mobile Appliance  Microfriend

Weak diversification

The 3 months correlation between Mobile and Microfriend is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mobile Appliance and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend and Mobile Appliance 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 Mobile Appliance 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 Mobile Appliance i.e., Mobile Appliance and Microfriend go up and down completely randomly.

Pair Corralation between Mobile Appliance and Microfriend

Assuming the 90 days trading horizon Mobile Appliance is expected to under-perform the Microfriend. But the stock apears to be less risky and, when comparing its historical volatility, Mobile Appliance is 1.32 times less risky than Microfriend. The stock trades about -0.02 of its potential returns per unit of risk. The Microfriend is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  292,500  in Microfriend on December 3, 2024 and sell it today you would earn a total of  500.00  from holding Microfriend or generate 0.17% return on investment over 90 days.

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

Mobile Appliance  vs.  Microfriend

Mobile Appliance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mobile Appliance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mobile Appliance 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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microfriend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Microfriend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mobile Appliance and Microfriend

The main advantage of trading using opposite Mobile Appliance and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mobile Appliance 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 Mobile Appliance 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.