Correlation Between Microsoft and KYUSHU EL

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

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

Diversification Opportunities for Microsoft and KYUSHU EL

-0.42

Correlation Coefficient

Microsoft  KYUSHU EL

Very good diversification

The 3 months correlation between Microsoft and KYUSHU is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KYUSHU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KYUSHU EL PWR 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 KYUSHU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KYUSHU EL PWR has no effect on the direction of Microsoft i.e., Microsoft and KYUSHU EL go up and down completely randomly.

Pair Corralation between Microsoft and KYUSHU EL

Given the investment horizon of 90 days Microsoft is expected to generate 0.48 times more return on investment than KYUSHU EL. However, Microsoft is 2.07 times less risky than KYUSHU EL. It trades about 0.02 of its potential returns per unit of risk. KYUSHU EL PWR is currently generating about -0.09 per unit of risk. If you would invest  43,264  in Microsoft on September 23, 2024 and sell it today you would earn a total of  396.00  from holding Microsoft or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Microsoft  vs.  KYUSHU EL PWR

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

KYUSHU EL PWR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KYUSHU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and KYUSHU EL

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

The idea behind Microsoft and KYUSHU EL PWR 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.