Correlation Between Yue Yuen and Microsoft

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Can any of the company-specific risk be diversified away by investing in both Yue Yuen and Microsoft 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 Yue Yuen and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yue Yuen Industrial and Microsoft, you can compare the effects of market volatilities on Yue Yuen and Microsoft 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 Yue Yuen with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yue Yuen and Microsoft.

Diversification Opportunities for Yue Yuen and Microsoft

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between YUEIY and Microsoft is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Yue Yuen Industrial and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Yue Yuen 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 Yue Yuen Industrial are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Yue Yuen i.e., Yue Yuen and Microsoft go up and down completely randomly.

Pair Corralation between Yue Yuen and Microsoft

Assuming the 90 days horizon Yue Yuen Industrial is expected to under-perform the Microsoft. In addition to that, Yue Yuen is 1.83 times more volatile than Microsoft. It trades about -0.01 of its total potential returns per unit of risk. Microsoft is currently generating about 0.03 per unit of volatility. If you would invest  21,045  in Microsoft on September 3, 2022 and sell it today you would earn a total of  4,457  from holding Microsoft or generate 21.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Yue Yuen Industrial  vs.  Microsoft

 Performance (%) 
       Timeline  
Yue Yuen Industrial 
YUEIY Performance
0 of 100
Over the last 90 days Yue Yuen Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Yue Yuen is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

YUEIY Price Channel

Microsoft 
Microsoft Performance
1 of 100
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.

Microsoft Price Channel

Yue Yuen and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Yue Yuen and Microsoft

The main advantage of trading using opposite Yue Yuen and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yue Yuen position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
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The idea behind Yue Yuen Industrial and Microsoft 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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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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