Correlation Between Microsoft and Lingotes
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lingotes 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 Lingotes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lingotes, you can compare the effects of market volatilities on Microsoft and Lingotes 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 Lingotes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lingotes.
Diversification Opportunities for Microsoft and Lingotes
Good diversification
The 3 months correlation between Microsoft and Lingotes is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lingotes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lingotes 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 Lingotes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lingotes has no effect on the direction of Microsoft i.e., Microsoft and Lingotes go up and down completely randomly.
Pair Corralation between Microsoft and Lingotes
Given the investment horizon of 90 days Microsoft is expected to generate 0.64 times more return on investment than Lingotes. However, Microsoft is 1.56 times less risky than Lingotes. It trades about 0.07 of its potential returns per unit of risk. Lingotes is currently generating about 0.01 per unit of risk. If you would invest 30,443 in Microsoft on August 29, 2024 and sell it today you would earn a total of 12,356 from holding Microsoft or generate 40.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.69% |
| Values | Daily Returns |
Microsoft vs. Lingotes
Performance |
| Timeline |
| Microsoft |
| Lingotes |
Microsoft and Lingotes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lingotes
The main advantage of trading using opposite Microsoft and Lingotes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lingotes 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 Lingotes will offset losses from the drop in Lingotes' 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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