Correlation Between Microsoft and Lucid
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lucid 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 Lucid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lucid Group, you can compare the effects of market volatilities on Microsoft and Lucid 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 Lucid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lucid.
Diversification Opportunities for Microsoft and Lucid
Average diversification
The 3 months correlation between Microsoft and Lucid is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group 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 Lucid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Group has no effect on the direction of Microsoft i.e., Microsoft and Lucid go up and down completely randomly.
Pair Corralation between Microsoft and Lucid
Given the investment horizon of 90 days Microsoft is expected to generate 3.47 times less return on investment than Lucid. But when comparing it to its historical volatility, Microsoft is 3.75 times less risky than Lucid. It trades about 0.03 of its potential returns per unit of risk. Lucid Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 288.00 in Lucid Group on November 9, 2024 and sell it today you would earn a total of 1.00 from holding Lucid Group or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Lucid Group
Performance |
| Timeline |
| Microsoft |
| Lucid Group |
Microsoft and Lucid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lucid
The main advantage of trading using opposite Microsoft and Lucid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lucid 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 Lucid will offset losses from the drop in Lucid's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |