Correlation Between Microsoft and Lotte Reit
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lotte Reit 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 Lotte Reit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lotte Reit Co, you can compare the effects of market volatilities on Microsoft and Lotte Reit 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 Lotte Reit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lotte Reit.
Diversification Opportunities for Microsoft and Lotte Reit
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Lotte is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lotte Reit Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Reit 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 Lotte Reit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Reit has no effect on the direction of Microsoft i.e., Microsoft and Lotte Reit go up and down completely randomly.
Pair Corralation between Microsoft and Lotte Reit
Given the investment horizon of 90 days Microsoft is expected to generate 0.95 times more return on investment than Lotte Reit. However, Microsoft is 1.05 times less risky than Lotte Reit. It trades about 0.06 of its potential returns per unit of risk. Lotte Reit Co is currently generating about -0.01 per unit of risk. If you would invest 34,287 in Microsoft on September 12, 2024 and sell it today you would earn a total of 10,046 from holding Microsoft or generate 29.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.88% |
| Values | Daily Returns |
Microsoft vs. Lotte Reit Co
Performance |
| Timeline |
| Microsoft |
| Lotte Reit |
Microsoft and Lotte Reit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lotte Reit
The main advantage of trading using opposite Microsoft and Lotte Reit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lotte Reit 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 Lotte Reit will offset losses from the drop in Lotte Reit's 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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