Correlation Between Microsoft and Huaxia Eye

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

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

Diversification Opportunities for Microsoft and Huaxia Eye

-0.13

Correlation Coefficient

Microsoft  Huaxia Eye

Good diversification

The 3 months correlation between Microsoft and Huaxia is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Huaxia Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Eye Hospital 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 Huaxia Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Eye Hospital has no effect on the direction of Microsoft i.e., Microsoft and Huaxia Eye go up and down completely randomly.

Pair Corralation between Microsoft and Huaxia Eye

Given the investment horizon of 90 days Microsoft is expected to generate 0.59 times more return on investment than Huaxia Eye. However, Microsoft is 1.71 times less risky than Huaxia Eye. It trades about 0.19 of its potential returns per unit of risk. Huaxia Eye Hospital is currently generating about -0.04 per unit of risk. If you would invest  41,879  in Microsoft on September 25, 2024 and sell it today you would earn a total of  2,054  from holding Microsoft or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Huaxia Eye Hospital

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.

Huaxia Eye Hospital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Eye Hospital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Eye sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Huaxia Eye

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

The idea behind Microsoft and Huaxia Eye Hospital 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.