Correlation Between Microsoft and Lowell Farms
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lowell Farms 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 Lowell Farms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lowell Farms, you can compare the effects of market volatilities on Microsoft and Lowell Farms 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 Lowell Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lowell Farms.
Diversification Opportunities for Microsoft and Lowell Farms
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Lowell is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lowell Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowell Farms 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 Lowell Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowell Farms has no effect on the direction of Microsoft i.e., Microsoft and Lowell Farms go up and down completely randomly.
Pair Corralation between Microsoft and Lowell Farms
Given the investment horizon of 90 days Microsoft is expected to generate 26.18 times less return on investment than Lowell Farms. But when comparing it to its historical volatility, Microsoft is 17.73 times less risky than Lowell Farms. It trades about 0.04 of its potential returns per unit of risk. Lowell Farms is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Lowell Farms on August 25, 2024 and sell it today you would lose (24.30) from holding Lowell Farms or give up 93.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Lowell Farms
Performance |
| Timeline |
| Microsoft |
| Lowell Farms |
Microsoft and Lowell Farms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lowell Farms
The main advantage of trading using opposite Microsoft and Lowell Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lowell Farms 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 Lowell Farms will offset losses from the drop in Lowell Farms' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lowell Farms vs. Green Cures Botanical | Lowell Farms vs. Galexxy Holdings | Lowell Farms vs. Indoor Harvest Corp | Lowell Farms vs. Speakeasy Cannabis Club |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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