Correlation Between Microsoft and Lekoil
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lekoil 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 Lekoil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lekoil Limited, you can compare the effects of market volatilities on Microsoft and Lekoil 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 Lekoil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lekoil.
Diversification Opportunities for Microsoft and Lekoil
Average diversification
The 3 months correlation between Microsoft and Lekoil is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lekoil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lekoil Limited 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 Lekoil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lekoil Limited has no effect on the direction of Microsoft i.e., Microsoft and Lekoil go up and down completely randomly.
Pair Corralation between Microsoft and Lekoil
Given the investment horizon of 90 days Microsoft is expected to generate 0.16 times more return on investment than Lekoil. However, Microsoft is 6.07 times less risky than Lekoil. It trades about -0.02 of its potential returns per unit of risk. Lekoil Limited is currently generating about -0.05 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 | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Microsoft vs. Lekoil Limited
Performance |
| Timeline |
| Microsoft |
| Lekoil Limited |
Microsoft and Lekoil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lekoil
The main advantage of trading using opposite Microsoft and Lekoil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lekoil 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 Lekoil will offset losses from the drop in Lekoil's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lekoil vs. Fukuyama Transporting Co | Lekoil vs. USWE SPORTS AB | Lekoil vs. National Bank Holdings | Lekoil vs. Gaztransport Technigaz SA |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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