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
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LEGAL and Microsoft is 0.49. 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 under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, LEGAL GENERAL is 1.25 times less risky than Microsoft. The stock trades about -0.03 of its potential returns per unit of risk. The Microsoft is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 39,352 in Microsoft on September 23, 2024 and sell it today you would earn a total of 2,778 from holding Microsoft or generate 7.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | 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. Apple Inc | LEGAL GENERAL vs. Apple Inc | LEGAL GENERAL vs. Apple Inc | LEGAL GENERAL vs. Apple Inc |
| Microsoft vs. Dalata Hotel Group | Microsoft vs. Richardson Electronics | Microsoft vs. Summit Hotel Properties | Microsoft vs. ELECTRONIC ARTS |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |