Correlation Between Microsoft and Ping An

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

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

Diversification Opportunities for Microsoft and Ping An

-0.16

Correlation Coefficient

Microsoft  Ping An

Good diversification

The 3 months correlation between Microsoft and Ping is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance and Microsoft 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 Microsoft are associated (or correlated) with Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of Microsoft i.e., Microsoft and Ping An go up and down completely randomly.

Pair Corralation between Microsoft and Ping An

Assuming the 90 days trading horizon Microsoft is expected to generate 2.73 times less return on investment than Ping An. But when comparing it to its historical volatility, Microsoft is 3.07 times less risky than Ping An. It trades about 0.08 of its potential returns per unit of risk. Ping An Insurance is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  272.00  in Ping An Insurance on September 26, 2024 and sell it today you would earn a total of  296.00  from holding Ping An Insurance or generate 108.82% return on investment over 90 days.

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

Microsoft  vs.  Ping An Insurance

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ping An Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ping An unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Ping An

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

The idea behind Microsoft and Ping An Insurance 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..