Correlation Between Microsoft and Lion Electric
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lion Electric 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 Lion Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lion Electric Corp, you can compare the effects of market volatilities on Microsoft and Lion Electric 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 Lion Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lion Electric.
Diversification Opportunities for Microsoft and Lion Electric
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Lion is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lion Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Electric 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 Lion Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Electric Corp has no effect on the direction of Microsoft i.e., Microsoft and Lion Electric go up and down completely randomly.
Pair Corralation between Microsoft and Lion Electric
Given the investment horizon of 90 days Microsoft is expected to generate 0.16 times more return on investment than Lion Electric. However, Microsoft is 6.24 times less risky than Lion Electric. It trades about -0.01 of its potential returns per unit of risk. Lion Electric Corp is currently generating about -0.38 per unit of risk. If you would invest 42,574 in Microsoft on August 29, 2024 and sell it today you would lose (275.00) from holding Microsoft or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Lion Electric Corp
Performance |
| Timeline |
| Microsoft |
| Lion Electric Corp |
Microsoft and Lion Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lion Electric
The main advantage of trading using opposite Microsoft and Lion Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lion Electric 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 Lion Electric will offset losses from the drop in Lion Electric's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lion Electric vs. Lion Electric Corp | Lion Electric vs. Alimentation Couchen Tard | Lion Electric vs. BRP Inc |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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