Correlation Between MicroAlgo and Extended Market

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

By analyzing existing cross correlation between MicroAlgo and Extended Market Index, you can compare the effects of market volatilities on MicroAlgo and Extended Market 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 MicroAlgo with a short position of Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroAlgo and Extended Market.

Diversification Opportunities for MicroAlgo and Extended Market

-0.79

Correlation Coefficient

MicroAlgo  Extended Market

Pay attention - limited upside

The 3 months correlation between MicroAlgo and Extended is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding MicroAlgo and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index and MicroAlgo 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 MicroAlgo are associated (or correlated) with Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of MicroAlgo i.e., MicroAlgo and Extended Market go up and down completely randomly.

Pair Corralation between MicroAlgo and Extended Market

Given the investment horizon of 90 days MicroAlgo is expected to under-perform the Extended Market. In addition to that, MicroAlgo is 11.62 times more volatile than Extended Market Index. It trades about -0.25 of its total potential returns per unit of risk. Extended Market Index is currently generating about 0.07 per unit of volatility. If you would invest  1,981  in Extended Market Index on May 13, 2025 and sell it today you would earn a total of  82.00  from holding Extended Market Index or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

MicroAlgo  vs.  Extended Market Index

MicroAlgo

Risk-Adjusted Performance

Weakest

Over the last 90 days MicroAlgo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in September 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Extended Market Index

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Extended Market Index are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Extended Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MicroAlgo and Extended Market

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

The idea behind MicroAlgo and Extended Market Index 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.