Correlation Between Microsoft and FLEX LNG
Can any of the company-specific risk be diversified away by investing in both Microsoft and FLEX LNG 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 FLEX LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and FLEX LNG, you can compare the effects of market volatilities on Microsoft and FLEX LNG 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 FLEX LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and FLEX LNG.
Diversification Opportunities for Microsoft and FLEX LNG
Pay attention - limited upside
The 3 months correlation between Microsoft and FLEX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and FLEX LNG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLEX LNG 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 FLEX LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLEX LNG has no effect on the direction of Microsoft i.e., Microsoft and FLEX LNG go up and down completely randomly.
Pair Corralation between Microsoft and FLEX LNG
Given the investment horizon of 90 days Microsoft is expected to generate 0.86 times more return on investment than FLEX LNG. However, Microsoft is 1.16 times less risky than FLEX LNG. It trades about 0.1 of its potential returns per unit of risk. FLEX LNG is currently generating about 0.01 per unit of risk. If you would invest 22,130 in Microsoft on August 28, 2024 and sell it today you would earn a total of 19,749 from holding Microsoft or generate 89.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. FLEX LNG
Performance |
| Timeline |
| Microsoft |
| FLEX LNG |
Microsoft and FLEX LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and FLEX LNG
The main advantage of trading using opposite Microsoft and FLEX LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, FLEX LNG 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 FLEX LNG will offset losses from the drop in FLEX LNG's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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