Correlation Between Microsoft and L3Harris Technologies
Can any of the company-specific risk be diversified away by investing in both Microsoft and L3Harris Technologies 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 L3Harris Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and L3Harris Technologies, you can compare the effects of market volatilities on Microsoft and L3Harris Technologies 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 L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and L3Harris Technologies.
Diversification Opportunities for Microsoft and L3Harris Technologies
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and L3Harris is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies 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 L3Harris Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3Harris Technologies has no effect on the direction of Microsoft i.e., Microsoft and L3Harris Technologies go up and down completely randomly.
Pair Corralation between Microsoft and L3Harris Technologies
Given the investment horizon of 90 days Microsoft is expected to generate 1.1 times less return on investment than L3Harris Technologies. But when comparing it to its historical volatility, Microsoft is 1.09 times less risky than L3Harris Technologies. It trades about 0.06 of its potential returns per unit of risk. L3Harris Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 18,237 in L3Harris Technologies on August 31, 2024 and sell it today you would earn a total of 6,372 from holding L3Harris Technologies or generate 34.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Microsoft vs. L3Harris Technologies
Performance |
| Timeline |
| Microsoft |
| L3Harris Technologies |
Microsoft and L3Harris Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and L3Harris Technologies
The main advantage of trading using opposite Microsoft and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, L3Harris Technologies 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 L3Harris Technologies will offset losses from the drop in L3Harris Technologies' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Positions Ratings module to 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.
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