Correlation Between Microsoft and LG Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and LG Energy 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 LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and LG Energy Solution, you can compare the effects of market volatilities on Microsoft and LG Energy 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 LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and LG Energy.
Diversification Opportunities for Microsoft and LG Energy
Significant diversification
The 3 months correlation between Microsoft and 373220 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution 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 LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of Microsoft i.e., Microsoft and LG Energy go up and down completely randomly.
Pair Corralation between Microsoft and LG Energy
Given the investment horizon of 90 days Microsoft is expected to generate 0.28 times more return on investment than LG Energy. However, Microsoft is 3.51 times less risky than LG Energy. It trades about 0.19 of its potential returns per unit of risk. LG Energy Solution is currently generating about -0.05 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. LG Energy Solution
Performance |
| Timeline |
| Microsoft |
| LG Energy Solution |
Microsoft and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and LG Energy
The main advantage of trading using opposite Microsoft and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, LG Energy 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 LG Energy will offset losses from the drop in LG Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| LG Energy vs. Doosan Heavy Ind | LG Energy vs. Hyosung Heavy Industries | LG Energy vs. Aprogen KIC | LG Energy vs. SNTEnergy Co |
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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