Correlation Between Microsoft and Lycos Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lycos Energy 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 Lycos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lycos Energy, you can compare the effects of market volatilities on Microsoft and Lycos Energy 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 Lycos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lycos Energy.
Diversification Opportunities for Microsoft and Lycos Energy
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Lycos is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lycos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lycos Energy 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 Lycos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lycos Energy has no effect on the direction of Microsoft i.e., Microsoft and Lycos Energy go up and down completely randomly.
Pair Corralation between Microsoft and Lycos Energy
Given the investment horizon of 90 days Microsoft is expected to generate 20.84 times less return on investment than Lycos Energy. But when comparing it to its historical volatility, Microsoft is 32.53 times less risky than Lycos Energy. It trades about 0.08 of its potential returns per unit of risk. Lycos Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 408.00 in Lycos Energy on October 30, 2024 and sell it today you would lose (168.00) from holding Lycos Energy or give up 41.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. Lycos Energy
Performance |
| Timeline |
| Microsoft |
| Lycos Energy |
Microsoft and Lycos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lycos Energy
The main advantage of trading using opposite Microsoft and Lycos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lycos Energy 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 Lycos Energy will offset losses from the drop in Lycos Energy's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Lycos Energy vs. Canso Credit Trust | Lycos Energy vs. iA Financial | Lycos Energy vs. Olympia Financial Group | Lycos Energy vs. North American Financial |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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