Correlation Between Microsoft and Longvie SA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Longvie SA 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 Longvie SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Longvie SA, you can compare the effects of market volatilities on Microsoft and Longvie SA 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 Longvie SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Longvie SA.
Diversification Opportunities for Microsoft and Longvie SA
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Longvie is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Longvie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longvie SA 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 Longvie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longvie SA has no effect on the direction of Microsoft i.e., Microsoft and Longvie SA go up and down completely randomly.
Pair Corralation between Microsoft and Longvie SA
Given the investment horizon of 90 days Microsoft is expected to generate 2.93 times less return on investment than Longvie SA. But when comparing it to its historical volatility, Microsoft is 3.93 times less risky than Longvie SA. It trades about 0.05 of its potential returns per unit of risk. Longvie SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,990 in Longvie SA on September 2, 2024 and sell it today you would earn a total of 595.00 from holding Longvie SA or generate 14.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.58% |
| Values | Daily Returns |
Microsoft vs. Longvie SA
Performance |
| Timeline |
| Microsoft |
| Longvie SA |
Microsoft and Longvie SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Longvie SA
The main advantage of trading using opposite Microsoft and Longvie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Longvie SA 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 Longvie SA will offset losses from the drop in Longvie SA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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