Correlation Between Microsoft and Dah Sing
Can any of the company-specific risk be diversified away by investing in both Microsoft and Dah Sing 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 Dah Sing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Dah Sing Financial, you can compare the effects of market volatilities on Microsoft and Dah Sing 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 Dah Sing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Dah Sing.
Diversification Opportunities for Microsoft and Dah Sing
Good diversification
The 3 months correlation between Microsoft and Dah is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Dah Sing Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dah Sing Financial 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 Dah Sing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dah Sing Financial has no effect on the direction of Microsoft i.e., Microsoft and Dah Sing go up and down completely randomly.
Pair Corralation between Microsoft and Dah Sing
Given the investment horizon of 90 days Microsoft is expected to generate 3.68 times less return on investment than Dah Sing. But when comparing it to its historical volatility, Microsoft is 1.31 times less risky than Dah Sing. It trades about 0.05 of its potential returns per unit of risk. Dah Sing Financial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 878.00 in Dah Sing Financial on September 16, 2024 and sell it today you would earn a total of 143.00 from holding Dah Sing Financial or generate 16.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Microsoft vs. Dah Sing Financial
Performance |
Timeline |
Microsoft |
Dah Sing Financial |
Microsoft and Dah Sing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Dah Sing
The main advantage of trading using opposite Microsoft and Dah Sing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Dah Sing 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 Dah Sing will offset losses from the drop in Dah Sing'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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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