Correlation Between Microfriend and Synopex

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

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

Diversification Opportunities for Microfriend and Synopex

0.68

Correlation Coefficient

Microfriend  Synopex

Poor diversification

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

Pair Corralation between Microfriend and Synopex

Assuming the 90 days trading horizon Microfriend is expected to under-perform the Synopex. In addition to that, Microfriend is 1.25 times more volatile than Synopex. It trades about -0.09 of its total potential returns per unit of risk. Synopex is currently generating about -0.04 per unit of volatility. If you would invest  683,809  in Synopex on October 4, 2024 and sell it today you would lose (90,809) from holding Synopex or give up 13.28% of portfolio value over 90 days.

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

Microfriend  vs.  Synopex

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.

Synopex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synopex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Microfriend and Synopex

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

The idea behind Microfriend and Synopex 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..