Correlation Between LEGAL GENERAL and Microsoft
Can any of the company-specific risk be diversified away by investing in both LEGAL GENERAL 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 LEGAL GENERAL and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGAL GENERAL and Microsoft, you can compare the effects of market volatilities on LEGAL GENERAL 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 LEGAL GENERAL with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGAL GENERAL and Microsoft.
Diversification Opportunities for LEGAL GENERAL and Microsoft
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LEGAL and Microsoft is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding LEGAL GENERAL and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and LEGAL GENERAL 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 LEGAL GENERAL 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 LEGAL GENERAL i.e., LEGAL GENERAL and Microsoft go up and down completely randomly.
Pair Corralation between LEGAL GENERAL and Microsoft
Assuming the 90 days trading horizon LEGAL GENERAL is expected to generate 1.0 times more return on investment than Microsoft. However, LEGAL GENERAL is as risky as Microsoft. It trades about -0.02 of its potential returns per unit of risk. Microsoft is currently generating about -0.47 per unit of risk. If you would invest 295.00 in LEGAL GENERAL on December 13, 2024 and sell it today you would lose (2.00) from holding LEGAL GENERAL or give up 0.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LEGAL GENERAL vs. Microsoft
Performance |
| Timeline |
| LEGAL GENERAL |
| Microsoft |
LEGAL GENERAL and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LEGAL GENERAL and Microsoft
The main advantage of trading using opposite LEGAL GENERAL and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGAL GENERAL 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.| LEGAL GENERAL vs. Cairo Communication SpA | LEGAL GENERAL vs. T MOBILE INCDL 00001 | LEGAL GENERAL vs. Salesforce | LEGAL GENERAL vs. Geely Automobile Holdings |
| Microsoft vs. CHEMICAL INDUSTRIES | Microsoft vs. INDO RAMA SYNTHETIC | Microsoft vs. Sekisui Chemical Co | Microsoft vs. Sinopec Shanghai Petrochemical |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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