Correlation Between Microsoft and Xilinmen Furniture

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

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

Diversification Opportunities for Microsoft and Xilinmen Furniture

-0.12

Correlation Coefficient

Microsoft  Xilinmen Furniture

Good diversification

The 3 months correlation between Microsoft and Xilinmen is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Xilinmen Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilinmen Furniture 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 Xilinmen Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilinmen Furniture has no effect on the direction of Microsoft i.e., Microsoft and Xilinmen Furniture go up and down completely randomly.

Pair Corralation between Microsoft and Xilinmen Furniture

Given the investment horizon of 90 days Microsoft is expected to under-perform the Xilinmen Furniture. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.25 times less risky than Xilinmen Furniture. The stock trades about -0.02 of its potential returns per unit of risk. The Xilinmen Furniture Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,877  in Xilinmen Furniture Co on August 31, 2024 and sell it today you would lose (27.00) from holding Xilinmen Furniture Co or give up 1.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.64%
Values	Daily Returns

Microsoft  vs.  Xilinmen Furniture Co

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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.

Xilinmen Furniture

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xilinmen Furniture Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xilinmen Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Xilinmen Furniture

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

The idea behind Microsoft and Xilinmen Furniture 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..