Correlation Between Microsoft and Roo Hsing
Can any of the company-specific risk be diversified away by investing in both Microsoft and Roo Hsing 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 Roo Hsing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Roo Hsing Co, you can compare the effects of market volatilities on Microsoft and Roo Hsing 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 Roo Hsing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Roo Hsing.
Diversification Opportunities for Microsoft and Roo Hsing
Very weak diversification
The 3 months correlation between Microsoft and Roo is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Roo Hsing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roo Hsing 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 Roo Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roo Hsing has no effect on the direction of Microsoft i.e., Microsoft and Roo Hsing go up and down completely randomly.
Pair Corralation between Microsoft and Roo Hsing
Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than Roo Hsing. However, Microsoft is 1.36 times less risky than Roo Hsing. It trades about 0.51 of its potential returns per unit of risk. Roo Hsing Co is currently generating about 0.1 per unit of risk. If you would invest 41,493 in Microsoft on September 19, 2024 and sell it today you would earn a total of 3,953 from holding Microsoft or generate 9.53% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 91.3% |
Values | Daily Returns |
Microsoft vs. Roo Hsing Co
Performance |
Timeline |
Microsoft |
Roo Hsing |
Microsoft and Roo Hsing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Roo Hsing
The main advantage of trading using opposite Microsoft and Roo Hsing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Roo Hsing 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 Roo Hsing will offset losses from the drop in Roo Hsing's long position.Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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