Correlation Between Microsoft and Leidos Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Leidos Holdings 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 Leidos Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Leidos Holdings, you can compare the effects of market volatilities on Microsoft and Leidos Holdings 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 Leidos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Leidos Holdings.
Diversification Opportunities for Microsoft and Leidos Holdings
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Leidos is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Leidos Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leidos Holdings 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 Leidos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leidos Holdings has no effect on the direction of Microsoft i.e., Microsoft and Leidos Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Leidos Holdings
Given the investment horizon of 90 days Microsoft is expected to generate 0.42 times more return on investment than Leidos Holdings. However, Microsoft is 2.41 times less risky than Leidos Holdings. It trades about -0.04 of its potential returns per unit of risk. Leidos Holdings is currently generating about -0.02 per unit of risk. If you would invest 42,574 in Microsoft on August 27, 2024 and sell it today you would lose (695.00) from holding Microsoft or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Leidos Holdings
Performance |
| Timeline |
| Microsoft |
| Leidos Holdings |
Microsoft and Leidos Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Leidos Holdings
The main advantage of trading using opposite Microsoft and Leidos Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Leidos Holdings 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 Leidos Holdings will offset losses from the drop in Leidos Holdings' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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