Correlation Between Microsoft and LIFEWAY FOODS
Can any of the company-specific risk be diversified away by investing in both Microsoft and LIFEWAY FOODS 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 LIFEWAY FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and LIFEWAY FOODS, you can compare the effects of market volatilities on Microsoft and LIFEWAY FOODS 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 LIFEWAY FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and LIFEWAY FOODS.
Diversification Opportunities for Microsoft and LIFEWAY FOODS
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and LIFEWAY is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and LIFEWAY FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFEWAY FOODS 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 LIFEWAY FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFEWAY FOODS has no effect on the direction of Microsoft i.e., Microsoft and LIFEWAY FOODS go up and down completely randomly.
Pair Corralation between Microsoft and LIFEWAY FOODS
Assuming the 90 days trading horizon Microsoft is expected to generate 3.23 times less return on investment than LIFEWAY FOODS. But when comparing it to its historical volatility, Microsoft is 1.79 times less risky than LIFEWAY FOODS. It trades about 0.05 of its potential returns per unit of risk. LIFEWAY FOODS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,770 in LIFEWAY FOODS on November 2, 2024 and sell it today you would earn a total of 450.00 from holding LIFEWAY FOODS or generate 25.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. LIFEWAY FOODS
Performance |
| Timeline |
| Microsoft |
| LIFEWAY FOODS |
Microsoft and LIFEWAY FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and LIFEWAY FOODS
The main advantage of trading using opposite Microsoft and LIFEWAY FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, LIFEWAY FOODS 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 LIFEWAY FOODS will offset losses from the drop in LIFEWAY FOODS's long position.| Microsoft vs. Carsales | Microsoft vs. PNC Financial Services | Microsoft vs. Synovus Financial Corp | Microsoft vs. CARSALESCOM |
| LIFEWAY FOODS vs. DIVERSIFIED ROYALTY | LIFEWAY FOODS vs. SLR Investment Corp | LIFEWAY FOODS vs. New Residential Investment | LIFEWAY FOODS vs. Japan Asia Investment |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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