Correlation Between Microsoft and Yong Shun

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

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

Diversification Opportunities for Microsoft and Yong Shun

-0.34

Correlation Coefficient

Microsoft  Yong Shun

Very good diversification

The 3 months correlation between Microsoft and Yong is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Yong Shun Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yong Shun Chemical 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 Yong Shun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yong Shun Chemical has no effect on the direction of Microsoft i.e., Microsoft and Yong Shun go up and down completely randomly.

Pair Corralation between Microsoft and Yong Shun

Given the investment horizon of 90 days Microsoft is expected to under-perform the Yong Shun. In addition to that, Microsoft is 1.98 times more volatile than Yong Shun Chemical. It trades about -0.11 of its total potential returns per unit of risk. Yong Shun Chemical is currently generating about 0.06 per unit of volatility. If you would invest  1,515  in Yong Shun Chemical on December 24, 2024 and sell it today you would earn a total of  40.00  from holding Yong Shun Chemical or generate 2.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Microsoft  vs.  Yong Shun Chemical

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.

Yong Shun Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yong Shun Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yong Shun is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Microsoft and Yong Shun

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

The idea behind Microsoft and Yong Shun Chemical 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.