Correlation Between Microsoft and Lion Forest
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lion Forest 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 Lion Forest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lion Forest Industries, you can compare the effects of market volatilities on Microsoft and Lion Forest 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 Lion Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lion Forest.
Diversification Opportunities for Microsoft and Lion Forest
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Lion is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lion Forest Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Forest Industries 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 Lion Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Forest Industries has no effect on the direction of Microsoft i.e., Microsoft and Lion Forest go up and down completely randomly.
Pair Corralation between Microsoft and Lion Forest
Given the investment horizon of 90 days Microsoft is expected to under-perform the Lion Forest. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.22 times less risky than Lion Forest. The stock trades about -0.04 of its potential returns per unit of risk. The Lion Forest Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 35.00 in Lion Forest Industries on August 30, 2024 and sell it today you would earn a total of 3.00 from holding Lion Forest Industries or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Lion Forest Industries
Performance |
| Timeline |
| Microsoft |
| Lion Forest Industries |
Microsoft and Lion Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lion Forest
The main advantage of trading using opposite Microsoft and Lion Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lion Forest 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 Lion Forest will offset losses from the drop in Lion Forest's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lion Forest vs. Central Industrial Corp | Lion Forest vs. Alliance Financial Group | Lion Forest vs. Uchi Technologies Bhd | Lion Forest vs. Dataprep Holdings Bhd |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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