Correlation Between Microsoft and ZhongAn Online

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

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

Diversification Opportunities for Microsoft and ZhongAn Online

-0.54

Correlation Coefficient

Microsoft  ZhongAn Online

Excellent diversification

The 3 months correlation between Microsoft and ZhongAn is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P 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 ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of Microsoft i.e., Microsoft and ZhongAn Online go up and down completely randomly.

Pair Corralation between Microsoft and ZhongAn Online

Assuming the 90 days trading horizon Microsoft is expected to generate 0.31 times more return on investment than ZhongAn Online. However, Microsoft is 3.22 times less risky than ZhongAn Online. It trades about 0.05 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.08 per unit of risk. If you would invest  40,790  in Microsoft on October 4, 2024 and sell it today you would earn a total of  305.00  from holding Microsoft or generate 0.75% return on investment over 90 days.

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

Microsoft  vs.  ZhongAn Online P

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 February 2025.

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and ZhongAn Online

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

The idea behind Microsoft and ZhongAn Online P 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.