Correlation Between Microsoft and Jiangsu Apon

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

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

Diversification Opportunities for Microsoft and Jiangsu Apon

0.65

Correlation Coefficient

Microsoft  Jiangsu Apon

Poor diversification

The 3 months correlation between Microsoft and Jiangsu is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Jiangsu Apon Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Apon Medical 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 Jiangsu Apon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Apon Medical has no effect on the direction of Microsoft i.e., Microsoft and Jiangsu Apon go up and down completely randomly.

Pair Corralation between Microsoft and Jiangsu Apon

Given the investment horizon of 90 days Microsoft is expected to under-perform the Jiangsu Apon. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 6.08 times less risky than Jiangsu Apon. The stock trades about -0.22 of its potential returns per unit of risk. The Jiangsu Apon Medical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,670  in Jiangsu Apon Medical on October 8, 2024 and sell it today you would earn a total of  18.00  from holding Jiangsu Apon Medical or generate 1.08% return on investment over 90 days.

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

Microsoft  vs.  Jiangsu Apon Medical

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Jiangsu Apon Medical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Apon Medical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Apon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Jiangsu Apon

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

The idea behind Microsoft and Jiangsu Apon Medical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.