Correlation Between Microsoft and Young Poong

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

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

Diversification Opportunities for Microsoft and Young Poong

-0.06

Correlation Coefficient

Microsoft  Young Poong

Good diversification

The 3 months correlation between Microsoft and Young is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Young Poong Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Young Poong Precision 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 Young Poong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Young Poong Precision has no effect on the direction of Microsoft i.e., Microsoft and Young Poong go up and down completely randomly.

Pair Corralation between Microsoft and Young Poong

Given the investment horizon of 90 days Microsoft is expected to generate 0.46 times more return on investment than Young Poong. However, Microsoft is 2.18 times less risky than Young Poong. It trades about 0.17 of its potential returns per unit of risk. Young Poong Precision is currently generating about -0.43 per unit of risk. If you would invest  40,764  in Microsoft on September 3, 2024 and sell it today you would earn a total of  1,582  from holding Microsoft or generate 3.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Microsoft  vs.  Young Poong Precision

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.

Young Poong Precision

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Young Poong Precision are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Young Poong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Young Poong

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

The idea behind Microsoft and Young Poong Precision 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.