Correlation Between Microsoft and Lincoln National
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lincoln National 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 Lincoln National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lincoln National, you can compare the effects of market volatilities on Microsoft and Lincoln National 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 Lincoln National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lincoln National.
Diversification Opportunities for Microsoft and Lincoln National
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Lincoln is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National 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 Lincoln National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln National has no effect on the direction of Microsoft i.e., Microsoft and Lincoln National go up and down completely randomly.
Pair Corralation between Microsoft and Lincoln National
Given the investment horizon of 90 days Microsoft is expected to generate 0.56 times more return on investment than Lincoln National. However, Microsoft is 1.79 times less risky than Lincoln National. It trades about 0.08 of its potential returns per unit of risk. Lincoln National is currently generating about 0.02 per unit of risk. If you would invest 24,042 in Microsoft on August 28, 2024 and sell it today you would earn a total of 17,837 from holding Microsoft or generate 74.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Lincoln National
Performance |
| Timeline |
| Microsoft |
| Lincoln National |
Microsoft and Lincoln National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lincoln National
The main advantage of trading using opposite Microsoft and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lincoln National 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 Lincoln National will offset losses from the drop in Lincoln National's 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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