Correlation Between Microsoft and EssilorLuxottica
Can any of the company-specific risk be diversified away by investing in both Microsoft and EssilorLuxottica 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 EssilorLuxottica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and EssilorLuxottica Socit anonyme, you can compare the effects of market volatilities on Microsoft and EssilorLuxottica 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 EssilorLuxottica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and EssilorLuxottica.
Diversification Opportunities for Microsoft and EssilorLuxottica
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and EssilorLuxottica is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and EssilorLuxottica Socit anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica Socit 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 EssilorLuxottica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EssilorLuxottica Socit has no effect on the direction of Microsoft i.e., Microsoft and EssilorLuxottica go up and down completely randomly.
Pair Corralation between Microsoft and EssilorLuxottica
Given the investment horizon of 90 days Microsoft is expected to under-perform the EssilorLuxottica. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.08 times less risky than EssilorLuxottica. The stock trades about -0.04 of its potential returns per unit of risk. The EssilorLuxottica Socit anonyme is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 22,976 in EssilorLuxottica Socit anonyme on August 31, 2024 and sell it today you would earn a total of 1,168 from holding EssilorLuxottica Socit anonyme or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. EssilorLuxottica Socit anonyme
Performance |
| Timeline |
| Microsoft |
| EssilorLuxottica Socit |
Microsoft and EssilorLuxottica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and EssilorLuxottica
The main advantage of trading using opposite Microsoft and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, EssilorLuxottica 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 EssilorLuxottica will offset losses from the drop in EssilorLuxottica'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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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