Correlation Between Microsoft and Xunlei
Can any of the company-specific risk be diversified away by investing in both Microsoft and Xunlei 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 Xunlei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Xunlei Ltd Adr, you can compare the effects of market volatilities on Microsoft and Xunlei 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 Xunlei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Xunlei.
Diversification Opportunities for Microsoft and Xunlei
Significant diversification
The 3 months correlation between Microsoft and Xunlei is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Microsoft i.e., Microsoft and Xunlei go up and down completely randomly.
Pair Corralation between Microsoft and Xunlei
Given the investment horizon of 90 days Microsoft is expected to generate 0.65 times more return on investment than Xunlei. However, Microsoft is 1.54 times less risky than Xunlei. It trades about 0.05 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.01 per unit of risk. If you would invest 40,279 in Microsoft on January 19, 2024 and sell it today you would earn a total of 905.00 from holding Microsoft or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.62% |
| Values | Daily Returns |
Microsoft vs. Xunlei Ltd Adr
Performance |
| Timeline |
| Microsoft |
| Xunlei Ltd Adr |
Microsoft and Xunlei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Xunlei
The main advantage of trading using opposite Microsoft and Xunlei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Xunlei 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 Xunlei will offset losses from the drop in Xunlei's long position.The idea behind Microsoft and Xunlei Ltd Adr 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.| Xunlei vs. Travelzoo | Xunlei vs. Emerald Expositions Events | Xunlei vs. Ziff Davis | Xunlei vs. Direct Digital Holdings |
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 CEOs Directory module to screen CEOs from public companies around the world.
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