Correlation Between LAM RESEARCH and Microsoft
Can any of the company-specific risk be diversified away by investing in both LAM RESEARCH 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 LAM RESEARCH and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAM RESEARCH P and Microsoft, you can compare the effects of market volatilities on LAM RESEARCH 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 LAM RESEARCH with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAM RESEARCH and Microsoft.
Diversification Opportunities for LAM RESEARCH and Microsoft
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between LAM and Microsoft is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding LAM RESEARCH P and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and LAM RESEARCH 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 LAM RESEARCH P 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 LAM RESEARCH i.e., LAM RESEARCH and Microsoft go up and down completely randomly.
Pair Corralation between LAM RESEARCH and Microsoft
Assuming the 90 days trading horizon LAM RESEARCH P is expected to generate 2.59 times more return on investment than Microsoft. However, LAM RESEARCH is 2.59 times more volatile than Microsoft. It trades about 0.14 of its potential returns per unit of risk. Microsoft is currently generating about 0.28 per unit of risk. If you would invest 6,991 in LAM RESEARCH P on September 14, 2024 and sell it today you would earn a total of 417.00 from holding LAM RESEARCH P or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 72.73% |
| Values | Daily Returns |
LAM RESEARCH P vs. Microsoft
Performance |
| Timeline |
| LAM RESEARCH P |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Microsoft |
LAM RESEARCH and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAM RESEARCH and Microsoft
The main advantage of trading using opposite LAM RESEARCH and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAM RESEARCH 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.| LAM RESEARCH vs. Apple Inc | LAM RESEARCH vs. Apple Inc | LAM RESEARCH vs. Apple Inc | LAM RESEARCH vs. Apple Inc |
| Microsoft vs. AEGEAN AIRLINES | Microsoft vs. United Airlines Holdings | Microsoft vs. American Airlines Group | Microsoft vs. ECHO INVESTMENT ZY |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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