Correlation Between Microsoft and Samhyun

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

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

Diversification Opportunities for Microsoft and Samhyun

-0.6

Correlation Coefficient

Microsoft  Samhyun

Excellent diversification

The 3 months correlation between Microsoft and Samhyun is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Samhyun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samhyun 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 Samhyun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samhyun has no effect on the direction of Microsoft i.e., Microsoft and Samhyun go up and down completely randomly.

Pair Corralation between Microsoft and Samhyun

Given the investment horizon of 90 days Microsoft is expected to generate 0.19 times more return on investment than Samhyun. However, Microsoft is 5.17 times less risky than Samhyun. It trades about 0.02 of its potential returns per unit of risk. Samhyun is currently generating about -0.01 per unit of risk. If you would invest  43,264  in Microsoft on September 21, 2024 and sell it today you would earn a total of  439.00  from holding Microsoft or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Microsoft  vs.  Samhyun

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Samhyun

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhyun has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samhyun 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 Samhyun

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

The idea behind Microsoft and Samhyun 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.