Correlation Between CHAODA MODERN and Microsoft

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

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

Diversification Opportunities for CHAODA MODERN and Microsoft

-0.42

Correlation Coefficient

CHAODA MODERN  Microsoft

Very good diversification

The 3 months correlation between CHAODA and Microsoft is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CHAODA MODERN AGRI and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and CHAODA MODERN 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 CHAODA MODERN AGRI are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of CHAODA MODERN i.e., CHAODA MODERN and Microsoft go up and down completely randomly.

Pair Corralation between CHAODA MODERN and Microsoft

Assuming the 90 days trading horizon CHAODA MODERN AGRI is expected to generate 18.06 times more return on investment than Microsoft. However, CHAODA MODERN is 18.06 times more volatile than Microsoft. It trades about 0.08 of its potential returns per unit of risk. Microsoft is currently generating about 0.09 per unit of risk. If you would invest  3.00  in CHAODA MODERN AGRI on September 24, 2024 and sell it today you would lose (1.00) from holding CHAODA MODERN AGRI or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

CHAODA MODERN AGRI  vs.  Microsoft

CHAODA MODERN AGRI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHAODA MODERN AGRI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CHAODA MODERN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CHAODA MODERN and Microsoft

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

The idea behind CHAODA MODERN AGRI and Microsoft 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.