Correlation Between Microsoft and Cheng Uei

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

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

Diversification Opportunities for Microsoft and Cheng Uei

0.17

Correlation Coefficient

Microsoft  Cheng Uei

Average diversification

The 3 months correlation between Microsoft and Cheng is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cheng Uei Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Uei Precision 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 Cheng Uei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Uei Precision has no effect on the direction of Microsoft i.e., Microsoft and Cheng Uei go up and down completely randomly.

Pair Corralation between Microsoft and Cheng Uei

Given the investment horizon of 90 days Microsoft is expected to generate 0.91 times more return on investment than Cheng Uei. However, Microsoft is 1.1 times less risky than Cheng Uei. It trades about -0.11 of its potential returns per unit of risk. Cheng Uei Precision is currently generating about -0.19 per unit of risk. If you would invest  42,398  in Microsoft on December 30, 2024 and sell it today you would lose (4,518) from holding Microsoft or give up 10.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Microsoft  vs.  Cheng Uei Precision

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cheng Uei Precision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cheng Uei Precision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Microsoft and Cheng Uei

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

The idea behind Microsoft and Cheng Uei Precision 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.