Correlation Between Microsoft and Doosan Solus

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

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

Diversification Opportunities for Microsoft and Doosan Solus

0.03

Correlation Coefficient

Microsoft  Doosan Solus

Significant diversification

The 3 months correlation between Microsoft and Doosan is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Doosan Solus Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Solus 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 Doosan Solus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Solus has no effect on the direction of Microsoft i.e., Microsoft and Doosan Solus go up and down completely randomly.

Pair Corralation between Microsoft and Doosan Solus

Given the investment horizon of 90 days Microsoft is expected to under-perform the Doosan Solus. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.9 times less risky than Doosan Solus. The stock trades about -0.11 of its potential returns per unit of risk. The Doosan Solus Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  192,884  in Doosan Solus Co on December 24, 2024 and sell it today you would earn a total of  1,816  from holding Doosan Solus Co or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Microsoft  vs.  Doosan Solus Co

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.

Doosan Solus

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Solus Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Doosan Solus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Doosan Solus

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

The idea behind Microsoft and Doosan Solus Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.