Correlation Between Microsoft Corp and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Leons Furniture 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 Corp and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft Corp CDR and Leons Furniture Limited, you can compare the effects of market volatilities on Microsoft Corp and Leons Furniture 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 Corp with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Leons Furniture.
Diversification Opportunities for Microsoft Corp and Leons Furniture
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Leons is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp CDR and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Microsoft Corp 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 Corp CDR are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Leons Furniture go up and down completely randomly.
Pair Corralation between Microsoft Corp and Leons Furniture
Assuming the 90 days trading horizon Microsoft Corp CDR is expected to generate 0.98 times more return on investment than Leons Furniture. However, Microsoft Corp CDR is 1.02 times less risky than Leons Furniture. It trades about 0.26 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about -0.09 per unit of risk. If you would invest 3,092 in Microsoft Corp CDR on September 13, 2024 and sell it today you would earn a total of 188.00 from holding Microsoft Corp CDR or generate 6.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft Corp CDR vs. Leons Furniture Limited
Performance |
| Timeline |
| Microsoft Corp CDR |
| Leons Furniture |
Microsoft Corp and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft Corp and Leons Furniture
The main advantage of trading using opposite Microsoft Corp and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Microsoft Corp vs. NextSource Materials | Microsoft Corp vs. Data Communications Management | Microsoft Corp vs. Information Services | Microsoft Corp vs. Brookfield Office Properties |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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