Correlation Between Microfriend and Eugene Investment

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

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

Diversification Opportunities for Microfriend and Eugene Investment

0.86

Correlation Coefficient

Microfriend  Eugene Investment

Very poor diversification

The 3 months correlation between Microfriend and Eugene is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and Eugene Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eugene Investment and Microfriend 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 Microfriend are associated (or correlated) with Eugene Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eugene Investment has no effect on the direction of Microfriend i.e., Microfriend and Eugene Investment go up and down completely randomly.

Pair Corralation between Microfriend and Eugene Investment

Assuming the 90 days trading horizon Microfriend is expected to generate 1.49 times more return on investment than Eugene Investment. However, Microfriend is 1.49 times more volatile than Eugene Investment Securities. It trades about -0.1 of its potential returns per unit of risk. Eugene Investment Securities is currently generating about -0.26 per unit of risk. If you would invest  408,000  in Microfriend on October 5, 2024 and sell it today you would lose (120,500) from holding Microfriend or give up 29.53% of portfolio value over 90 days.

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

Microfriend  vs.  Eugene Investment Securities

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.

Eugene Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eugene Investment Securities 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 Microfriend and Eugene Investment

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

The idea behind Microfriend and Eugene Investment Securities 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.