Correlation Between Microsoft and Logility
Can any of the company-specific risk be diversified away by investing in both Microsoft and Logility 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 Logility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Logility, you can compare the effects of market volatilities on Microsoft and Logility 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 Logility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Logility.
Diversification Opportunities for Microsoft and Logility
Significant diversification
The 3 months correlation between Microsoft and Logility is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Logility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logility 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 Logility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logility has no effect on the direction of Microsoft i.e., Microsoft and Logility go up and down completely randomly.
Pair Corralation between Microsoft and Logility
Given the investment horizon of 90 days Microsoft is expected to generate 0.62 times more return on investment than Logility. However, Microsoft is 1.61 times less risky than Logility. It trades about 0.08 of its potential returns per unit of risk. Logility is currently generating about -0.01 per unit of risk. If you would invest 24,843 in Microsoft on September 2, 2024 and sell it today you would earn a total of 17,503 from holding Microsoft or generate 70.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Logility
Performance |
| Timeline |
| Microsoft |
| Logility |
Microsoft and Logility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Logility
The main advantage of trading using opposite Microsoft and Logility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Logility 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 Logility will offset losses from the drop in Logility's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Logility vs. Corporacion America Airports | Logility vs. EvoAir Holdings | Logility vs. Summit Hotel Properties | Logility vs. Alvarium Tiedemann 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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