Correlation Between Microsoft and LendingClub Corp
Can any of the company-specific risk be diversified away by investing in both Microsoft and LendingClub Corp 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 LendingClub Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and LendingClub Corp, you can compare the effects of market volatilities on Microsoft and LendingClub Corp 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 LendingClub Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and LendingClub Corp.
Diversification Opportunities for Microsoft and LendingClub Corp
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and LendingClub is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and LendingClub Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub Corp 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 LendingClub Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub Corp has no effect on the direction of Microsoft i.e., Microsoft and LendingClub Corp go up and down completely randomly.
Pair Corralation between Microsoft and LendingClub Corp
Given the investment horizon of 90 days Microsoft is expected to under-perform the LendingClub Corp. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.34 times less risky than LendingClub Corp. The stock trades about -0.06 of its potential returns per unit of risk. The LendingClub Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,246 in LendingClub Corp on August 24, 2024 and sell it today you would earn a total of 344.00 from holding LendingClub Corp or generate 27.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. LendingClub Corp
Performance |
| Timeline |
| Microsoft |
| LendingClub Corp |
Microsoft and LendingClub Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and LendingClub Corp
The main advantage of trading using opposite Microsoft and LendingClub Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, LendingClub Corp 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 LendingClub Corp will offset losses from the drop in LendingClub Corp'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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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