Correlation Between Microsoft and Lyxor BEL
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lyxor BEL 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 Lyxor BEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lyxor BEL 20, you can compare the effects of market volatilities on Microsoft and Lyxor BEL 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 Lyxor BEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lyxor BEL.
Diversification Opportunities for Microsoft and Lyxor BEL
Modest diversification
The 3 months correlation between Microsoft and Lyxor is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lyxor BEL 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor BEL 20 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 Lyxor BEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor BEL 20 has no effect on the direction of Microsoft i.e., Microsoft and Lyxor BEL go up and down completely randomly.
Pair Corralation between Microsoft and Lyxor BEL
Given the investment horizon of 90 days Microsoft is expected to generate 1.85 times more return on investment than Lyxor BEL. However, Microsoft is 1.85 times more volatile than Lyxor BEL 20. It trades about -0.02 of its potential returns per unit of risk. Lyxor BEL 20 is currently generating about -0.06 per unit of risk. If you would invest 42,944 in Microsoft on August 30, 2024 and sell it today you would lose (645.00) from holding Microsoft or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Lyxor BEL 20
Performance |
| Timeline |
| Microsoft |
| Lyxor BEL 20 |
Microsoft and Lyxor BEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lyxor BEL
The main advantage of trading using opposite Microsoft and Lyxor BEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lyxor BEL 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 Lyxor BEL will offset losses from the drop in Lyxor BEL's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lyxor BEL vs. iShares II Public | Lyxor BEL vs. VanEck AEX UCITS | Lyxor BEL vs. Amundi Index Solutions | Lyxor BEL vs. Ackermans Van Haaren |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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