Correlation Between Microsoft and Themes Lithium
Can any of the company-specific risk be diversified away by investing in both Microsoft and Themes Lithium 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 Themes Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Themes Lithium Battery, you can compare the effects of market volatilities on Microsoft and Themes Lithium 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 Themes Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Themes Lithium.
Diversification Opportunities for Microsoft and Themes Lithium
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Themes is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Themes Lithium Battery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Lithium Battery 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 Themes Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Lithium Battery has no effect on the direction of Microsoft i.e., Microsoft and Themes Lithium go up and down completely randomly.
Pair Corralation between Microsoft and Themes Lithium
Given the investment horizon of 90 days Microsoft is expected to generate 3.11 times less return on investment than Themes Lithium. But when comparing it to its historical volatility, Microsoft is 1.96 times less risky than Themes Lithium. It trades about 0.08 of its potential returns per unit of risk. Themes Lithium Battery is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,684 in Themes Lithium Battery on August 25, 2024 and sell it today you would earn a total of 421.00 from holding Themes Lithium Battery or generate 15.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 9.07% |
| Values | Daily Returns |
Microsoft vs. Themes Lithium Battery
Performance |
| Timeline |
| Microsoft |
| Themes Lithium Battery |
Microsoft and Themes Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Themes Lithium
The main advantage of trading using opposite Microsoft and Themes Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Themes Lithium 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 Themes Lithium will offset losses from the drop in Themes Lithium's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Themes Lithium vs. First Trust Exchange Traded | Themes Lithium vs. Ultimus Managers Trust | Themes Lithium vs. Horizon Kinetics Medical | Themes Lithium vs. Harbor Health Care |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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