Correlation Between Microsoft and TIMES CHINA

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

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

Diversification Opportunities for Microsoft and TIMES CHINA

-0.33

Correlation Coefficient

Microsoft  TIMES CHINA

Very good diversification

The 3 months correlation between Microsoft and TIMES is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and TIMES CHINA HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIMES CHINA HLDGS 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 TIMES CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIMES CHINA HLDGS has no effect on the direction of Microsoft i.e., Microsoft and TIMES CHINA go up and down completely randomly.

Pair Corralation between Microsoft and TIMES CHINA

Given the investment horizon of 90 days Microsoft is expected to under-perform the TIMES CHINA. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.31 times less risky than TIMES CHINA. The stock trades about -0.24 of its potential returns per unit of risk. The TIMES CHINA HLDGS is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3.55  in TIMES CHINA HLDGS on October 12, 2024 and sell it today you would lose (0.20) from holding TIMES CHINA HLDGS or give up 5.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Microsoft  vs.  TIMES CHINA HLDGS

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.

TIMES CHINA HLDGS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TIMES CHINA HLDGS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TIMES CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and TIMES CHINA

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

The idea behind Microsoft and TIMES CHINA HLDGS 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.