Correlation Between Microsoft and CNVISION MEDIA

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

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

Diversification Opportunities for Microsoft and CNVISION MEDIA

0.09

Correlation Coefficient

Microsoft  CNVISION MEDIA

Significant diversification

The 3 months correlation between Microsoft and CNVISION is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CNVISION MEDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNVISION MEDIA 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 CNVISION MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNVISION MEDIA has no effect on the direction of Microsoft i.e., Microsoft and CNVISION MEDIA go up and down completely randomly.

Pair Corralation between Microsoft and CNVISION MEDIA

Assuming the 90 days trading horizon Microsoft is expected to generate 3.9 times less return on investment than CNVISION MEDIA. But when comparing it to its historical volatility, Microsoft is 2.72 times less risky than CNVISION MEDIA. It trades about 0.1 of its potential returns per unit of risk. CNVISION MEDIA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4.15  in CNVISION MEDIA on September 25, 2024 and sell it today you would earn a total of  1.65  from holding CNVISION MEDIA or generate 39.76% return on investment over 90 days.

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

Microsoft  vs.  CNVISION MEDIA

Microsoft

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CNVISION MEDIA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CNVISION MEDIA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CNVISION MEDIA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and CNVISION MEDIA

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

The idea behind Microsoft and CNVISION MEDIA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.